UC-NRLF 

III 


7~3f    — 


Supplementary  Exercises  for  Schools  of  Accountancy 
and  Business  Administration 


Supplementary  Exercises  for  Schools  of  Accountancy 
and  Business  Administration 


ALFRED  J.  THOMPSON 

Supervisor  of  Freshman  Accounting,  Northeastern  College 
Boston   Young  Men's  Christian  Association 


ASSOCIATION    PRESS 

New   York:   347   Madison   Avenue 
1920 


rtFs-ui 

T3?    . 


Copyright,  1920,  by  The  International  Committee  of 
Young  Men's   Christian   Associations 


..  i :  •■  ?: .-. •  -. 


FOREWORD 

As  an  aid  to  Associations  desiring  to  conduct  courses  in  Accountancy, 
the  Commission  offers  this  series  of  exercises  prepared  by  Alfred  J. 
Thompson  of  the  Boston  Young  Men's  Christian  Association,  in  addition  to 
the  synopsis  of  class  sessions  for  the  first  year,  as  given  in  Syllabus  B-17. 

These  exercises  are  not  new  or  untried,  but  are  the  product  of  seven 
years'  experience  in  a  successful  school  of  commerce  in  a  large  Associa- 
tion. They  may,  therefore,  be  used  with  full  confidence  in  their  practical 
value. 

The  Commission  realizes  that  questions  will  inevitably  arise  in  connec- 
tion with  these  outlines,  and  welcomes  criticisms  and  suggestions.  It 
stands  ready  to  explain  any  points  submitted  for  judgment.  Address 
Executive  Secretary,  347  Madison  Avenue,  New  York,  N.  Y. 

COMMISSION 

D.  S.  Sylvester,  Boston  G.  H.  Newlove,  Washington 

H.  C.  Daines,  Chicago  F.  L.  Roth,  Cleveland 

C.  A.  Wesp,  Philadelphia  W.  P.  Dies,  Detroit 

William  Orr,  Editor 


X 


456560 

7° 


The  following  problems  are  to  be  posted  to  ledger  accounts,  four  accounts  to  a  page,  and  are  designed  to 
show,  in  a  simple  manner  and  in  double  entry  form,  the  relations  of  the  accounts  to  each  other. 

EXERCISE  A 
"Student,"  Proprietor 

April    1.    "Student"  commences  business  this  day  and  deposits  in  his  bank  $5,000.     (Debit  "Cash"  $5,000, 
credit  account  with  yourself  "Capital"  $5,000.) 

2.  Purchased  Mdse.  for  cash  $3,000.     (Debit  "Purchases,"  credit  "Cash.") 

3.  Sold  Mdse.  for  cash  $125.     (Debit  "Cash,"  credit  "Sales.") 
8.       "         "        "       "     $600. 

10.  "         "        "      "     $525. 

11.  Bought  Mdse.  for  cash  $700. 
15.  Sold  Mdse.  for  cash  $750. 
20.  "         "        "      "     $260. 
25.  "         "        "      "     $480. 
30.  "         "        "      "     $183. 

Make  Trial  Balance  on  journal  paper. 

Questions: 

1.  If  the  selling  price  is  120%  of  the  cost,  what  is  the  cost  of  goods  sold? 

2.  What  is  the  cost  of  the  goods  unsold  ? 

3.  What  is  the  profit  on  the  goods  sold  ? 

EXERCISE  B 
J.  T.  Brooks,  Proprietor 

May     1.  Mr.  Brooks  commences  business  by  depositing  $10,000. 

2.  Purchased  for  cash,  Mdse.  $9,000. 

5.  Sold  for  cash,  Mdse.  $5,000. 

10.  "      "      "  "       $6,000. 

11.  Bought  for  cash,  Mdse.  $3,000. 


13. 

(<         « 

%t          < 

'       $2,000. 

16. 

Sold 

<<          < 

'       $4,000. 

17. 

Bought    " 

<<          < 

'       $8,000. 

20. 

Sold 

<<          % 

$2,200. 

25. 

«           << 

«          < 

'       $4,150. 

26. 

Bought    " 

<(          « 

'       $2,950. 

31. 

Sold 

c(                       < 

'       $1,340. 

31. 

Make  Trial  Balance. 

The  cost  of  goods  on  hand  May  31,  per  inventory,  is  $6,798.     Find  the  cost  of  goods  sold  and  the  per- 
centage of  profit  to  sales. 

EXERCISE  C 
"Student,"  Proprietor 

June     1.    "Student"  commences  business  this  day  and  deposits  $7,000  in  the  Security  National  Bank.  (Debit 
"Cash,"  credit  an  account  headed  with  your  own  name  followed  by  "Capital.") 
Bought  of  Bacon  &  Co.  to  be  paid  for  in  ten  days,  Mdse.  $10,000.    (Open  an  account  with  "Bacon 
&  Co."  and  credit  it  $10,000.     Debit  Purchases.) 

3.  Sold  for  cash,  Mdse.  $1,000. 

4.  "       "      "  "  800. 
8.      "      "      "          "         1,500. 

[1] 


10.  Sold  to  Marvin  &Go«,.tc<be,  paid; for  in  rO'days,  Mdse.  $2,000.     (Open  an  account  with  "Marvin 

&  Co.,"  and- debit  is'^Obd. :  -(br'e'dit "Sales.) 

11.  Paid  Cash  to  Bacon  &  Co.  for  bill  of  June  1. 

12.  Sold  for  cash,  Mdse.  $1,260. 

Bought  of  Bacon  &  Co.  at  10  days,  Mdse.  $7,250. 
15.    Sold  to  Marvin  &  Co.  at  10  days,  Mdse.  $3,000. 

18.  Sold  for  cash,  Mdse.  $2,480. 

19.  "      "      "  "       $2,000. 

20.  Received  cash  of  Marvin  &  Co.  for  bill  of  June  10. 
22.    Paid  cash  to  Bacon  &  Co.  for  bill  of  June  12. 

25.    Received  cash  of  Marvin  &  Co.  for  bill  of  June  15. 
28.    Bought  of  Bacon  &  Co.  at  10  days,  Mdse.  $3,400. 

30.  Sold  Marvin  &  Co.  at  10  days,  Mdse.  $3,500. 
Make  Trial  Balance. 

Questions:   If  the  profit  is  25%  of  the  sales,  what  is  the  cost  of  goods  sold?    What  is  the  cost  of  the  goods 
on  hand? 

EXERCISE  D 

July     1.  "Student"  commences  business  by  depositing  in  the  Security  National  Bank,  $8,000. 

2.  Purchased  a  stock  of  goods  for  cash  $6,000. 

3.  Bought  of  Daniels  &  Herrick,  Mdse.  at  10  days,  $2,500. 
5.  Sold  to  Martin  &  Co.  at  10  days,  Mdse.  $425. 

8.  Cash  sales  of  Mdse.  $210. 

9.  Sold  for  cash  to  Lee  &  Co.,  Mdse.  $260/ 

10.      "      "      "      "  Naman  &  Gooch,  Mdse.  $850.75. 

12.  Sold  to  Martin  &  Co.  at  10  days,  Mdse.  $728.60. 

13.  Paid  cash  to  Daniels  &  Herrick  for  bill  of  July  3. 

15.  Received  cash  from  Martin  &  Co.  for  bill  of  July  5. 

16.  Paid  A.  W.  Marsh,  clerk,  $15.     (Open  an  account  with  "Expense,"  and  debit  it  for  the  $15.  Credit 

Cash. ) 
18.    Sold  Martin  &  Co.  for  their  note  at  10  days,  Mdse.  $2,150.     (Open  an  account  with  "Notes  Re- 
ceivable" and  debit  it  with  $2,150.    Credit  Sales.) 

22.  Paid  A.  W.  Marsh,  clerk,  $15. 

Received  cash  of  Martin  &  Co.  for  bill  of  July  12. 

Sold  White  &  Benjamin,  Mdse.  for  their  note  at  20  days,  $267. 

23.  Bought  of  Daniels  &  Herrick  for  my  note  at  10  days,  Mdse.  $450.75.     (Open  an  account  headed 

"Notes  Payable,"  and  credit  it  for  $450.75.    Debit  Purchases.) 
28.    Paid  cash  to  J.  B.  Emerson,  express  charges  for  the  month  on  goods  sold,  $18.    (Debit  Expense.) 
Received  cash  of  Martin  &  Co.  for  their  note  of  July  18. 

31.  Student  withdraws,  for  personal  use,  cash  $50.     (Debit  "Student's  Capital"  account.) 
31.    Make  Trial  Balance. 

EXERCISE  E   (MODEL) 

January  1,  1915 
A.  W.  Swenson  commences  business  by  depositing  $10,500  in  the  National  Shawmut  Bank. 

January  2. 
Hired  store,  No.  1492  Columbus  Ave.,  of  M.  Holmberg  and  paid  him  $125  for  rent,  one  month  in  advance. 

January  3. 
Bought  for  cash  of  the  Baker  Furniture  Co.  office  and  store  furniture,  as  per  bill,  $260. 

January  5. 
Bought  of  the  Simmons  Hardware  Co.,  to  be  paid  for  in  10  days,  Mdse.  as  per  invoice,  $1,245.60. 

[2] 


January  8. 
Bought  of  the  Ames  Plow  Co.  to  be  paid  for  in  10  days,  Mdse.,  as  per  invoice,  $1,540.90. 

January  11. 
Bought  of  the  Globe  Nail  Co.  at  30  days,  Mdse.  $428.75. 

January  13. 
Bought  of  the  Taunton  Stove  Co.  at  30  days,  Mdse.  $642.80. 

January  15. 
Paid  cash  to  the  Simmons  Hardware  Co.  for  bill  of  January  5,  less  2%  discount. 
Bought  of  Dame,  Stoddard  &  Co.  at  30  days,  cutlery,  as  per  invoice,  $460.75. 

January  18. 
Paid  cash  to  the  Ames  Plow  Co.  for  bill  of  January  8,  less  discount  3%. 

January  19. 
Sold  to  J.  C.  Atwood  at  10  days,  Mdse.,  as  per  bill,  $140.60. 

January  21. 
Cash  sales  of  Mdse.  to  date  $170.50. 

January  22. 

Sold  to  Bowers  &  Co.  on  account,  Mdse.  $346.50.  (In  this  problem  if  no  term  of  credit  is  mentioned,  30 
days  is  to  be  understood.) 

January  23. 
Cash  sales  to  date  $210.90. 

January  25. 
Sold  to  J.  P.  Caldwell,  Mdse.,  on  account,  $160.25. 

January  26. 
Bought  of  the  Piper  Mfg.  Co.  for  my  (Swenson's)  note  at  20  days,  Mdse.,  as  per  invoice,  $1,140.60. 

January  27. 
Sold  Mdse.  to  L.  G.  Stetson  for  his  note  at  30  days,  $340. 
Cash  sales  to  date,  $290.34. 

The  National  Shawmut  Bank  has  discounted  L.  G.  Stetson's  note,  and  has  placed  the  net  proceeds  to  my 
credit.     (Net  proceeds  $338.30,  discount  $1.70.) 

January  28. 
Sold  Burton  &  Holmes,  Mdse.  on  account,  $460.80. 

January  29. 
Cash  sales  of  Mdse.  to  date  $75.80. 

J.  C.  Atwood  notifies  Mr.  Swenson  that  he  cannot  pay  his  bill  of  January  19  and  offers  his  note  at  30  days. 
Mr.  Swenson  agrees  to  take  this  note,  providing  the  note  is  made  to  cover  the  debt  and  30  days'  interest, 
which  is  accordingly  done. 

January  30. 
Mr.  Swenson  withdraws  $100,  which  is  to  be  considered  as  payment  for  his  services. 
Paid  Phillip  Lee,  salesman,  for  one  month,  $80. 

Required: 

(a)  Journal  entries  for  all  transactions. 

(&)  Ledger  Accounts. 

(c)  Trial  Balance. 

(d)  Profit  and  loss  statement. 

(e)  Balance  Sheet. 
(/)  Closing  entries. 

Merchandise  inventory  January  30,  1915,  taken  at  cost,  $3,891.40. 

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12 


EXERCISE  NO.  100 


This  problem  is  given  as  a  drill  in  bookkeeping  technique, 
fully  studied. 


The  details  of  Model  Exercise  E  must  be  care- 


Required: 

(a)  Make  journal  entries  of  transactions  in  the  same  manner  as  given  in  Model  Exercise  E. 

(b)  Post  the  journal  entries  on  to  ledger  sheets,  opening  and  arranging  accounts  as  follows: 


Account  Lines 

Cash 21 

E.  B.  Lowney 6 

K.  W.  Buck 5 

C.  A.  Blake 5 

Henry  Wenz  &  Co 4 

Brett  &  Blish 6 

Notes  Receivable 6 

Inventory 4 

Furniture  &  Fixtures 5 

Armstrong  &  Co 6 

Avery  Manufacturing  Co 4 

C.  W.  Coffin  &  Co 5 


Account  Lines 

Coburn  &  Co 4 

Everett  &  Co 4 

Thomas  E.  Cooper,  Capital 6 

Sales    18 

Purchases   . . . . 10 

Freight  In 9 

Expense  10 

Purchases  Discount 8 

Sales  Discount 9 

Interest 7 

Profit  and  loss 8 


(c)  Make  trial  balance. 

(d)  Make  profit  and  loss  statement. 

(e)  Make  balance  sheet. 

(/)  Make  closing  journal  entries  and  post  them  into  ledger. 

(g)  Rule  off  accounts  that  balance. 

(h)  Rule  and  bring  down  the  balances  of  cash  and  proprietor's  accounts.     (See  model  form.) 

N.  B.    As  a  matter  of  convenience  the  arrangement  of  ledger  accounts  conforms  to  the  order  in  which 
they  are  used  on  the  balance  sheet  and  profit  and  loss  statement. 

Points  to  be  observed: 

On  the  balance  sheet  do  not  give  the  names  of  the  customers'  accounts.    Place  their  total  against  "Accounts 
Receivable."    Carry  out  the  same  idea  in  creditors'  accounts,  placing  the  total  against  "Accounts  Payable." 

ABBREVIATIONS  SHOULD  NOT  BE  USED  AND  PUNCTUATION  WILL  BE  REQUIRED  ON 
BALANCE  SHEETS  AND  PROFIT  AND  LOSS  STATEMENTS. 

When  necessary,  abbreviations  may  be  used  in  journal  entries,  provided  their  use  will  not  obscure  the 
meaning. 

Form  and  arrangement  are  of  first  importance  in  all  work. 

Model  forms  must  be  carefully  studied  and  will  be  furnished  to  the  students  as  needed. 

"Freight  In"  is  to  be  added  to  the  purchases  on  the  profit  and  loss  statement  as  follows : 


Deduct — Cost  of  Goods  Sold : 

Purchases   

Freight  in 


$10,666.50 
67.29 


Deduct — Inventory  of  January  30,  1918. 


$10,733.79 
6,444.50 


$4,289.29 


[131 


TRANSACTIONS 
EXERCISE  NO.  100 

January  1,  1918 
Thomas  E.  Cooper  has  been  employed  as  a  business  manager  for  a  large  concern,  and  has  left  his  position 

to  go  into  business  for  himself.    He  is  favorably  known  and  is  able  to  obtain  credit. 
Deposited  $7,000  in  First  National  Bank. 

Gave  check  for  $200  to  Whidden  &  Co.  for  store  and  office  furniture. 

Paid  $25  for  various  utensils  and  tools  to  be  used  about  the  store  and  office.     (Debit  Expense.) 
Hired  store  No.  1253  Ash  Street,  agreeing  to  pay  $100  per  month  in  advance.    Gave  check  to  Savage  &  Co. 
for  January  rent. 

January  2. 

Bought  of  Armstrong  &  Co.,  Mdse.  4/10  N/30  (4%  discount  if  paid  in  10  days,  net  30  days),  $2,855. 
Paid  freight  on  above  $20.49.     (Debit  "Freight  In"  account.) 
Bought  of  C.  W.  Coffin  &  Co.,  Mdse.,  3/10  N/30,  $1,875.50. 
Paid  freight  on  above  $17.20. 

January  4. 

Bought  of  Avery  Mfg.  Co.,  Mdse.  at  30  days  net,  $1,429.80. 
Paid  freight  on  above  $10.80. 

January  5. 
Sold  Mdse.  to  C.  L.  Patch  for  cash  $250. 
Bought  Mdse.  of  Coburn  &  Co.,  5/10  N/60,  $894.75. 
Paid  freight  on  above  $7.60. 

January  6. 
Sold  Mdse.  to  E.  B.  Lowney,  2/10  N/30,  $150.72. 
Sold  Mdse.  to  K.  W.  Buck,  3/10  N/30,  $451.20. 
Cash  sales  of  Mdse.  $78.90. 
Post  into  ledger  all  transactions  up  to  this  point 

January  9. 
Sold  Mdse.  to  C.  A.  Blake  at  10  days,  net,  $230.60. 
Paid  H.  O.  Holmes,  clerk  for  services  one  week,  $15. 

January  11. 
Sold  Mdse.  to  Henry  Wenz  &  Co.,  3/10  N/60,  $750.94. 
Bought  of  Armstrong  &  Co.,  Mdse.,  4/10  N/60,  $1,450.75. 
Paid  freight  on  above  $11.20. 
Sold  Mdse.  to  E.  B.  Lowney,  2/10  N/30,  $172.75. 
Cash  sales  $28.90. 

Paid  Armstrong  &  Co.  for  bill  of  January  2,  less  discount. 
Paid  C.  W.  Coffin  &  Co.  for  bill  of  January  2,  less  discount. 

January  14. 
Sold  Mdse.  to  Brett  &  Blish,  3/10  N/30,  $445.20. 
Cash  sales  $126.40. 
Post  into  ledger  all  transactions  up  to  this  point. 

January  15. 
Paid  Coburn  &  Co.  bill  of  January  5,  less  discount. 

January  16. 
Received  cash  of  E.  B.  Lowney  for  bill  of  January  6,  less  discount. 
Received  cash  of  K.  W.  Buck  for  bill  of  January  6,  less  discount. 
Paid  H.  O.  Holmes,  clerk  $15. 
Cash  sales  $52.40. 

[14] 


January  19. 
Bought  of  Everett  &  Co.  at  30  days,  1  typewriter  $85.     (Debit  "Furniture  and  Fixtures.") 

January  22. 

Sold  Mdse.  to  Miller  &  Co.  for  their  note  at  60  days,  $625. 

C.  A.  Blake,  being  unable  to  pay  his  bill  of  the  9th  inst,  Mr.  Cooper  took  his  note  at  60  days,  the  amount 

of  the  note  including  the  debt  and  60  days'  interest  on  the  debt. 
Received  cash  of  E.  B.  Lowney  for  bill  of  January  11,  less  discount. 

January  25. 

The  First  National  Bank  has  discounted  Miller  &  Co.'s  note  of  the  22nd  inst.    Net  proceeds  passed  to  my 

credit,  $619.07. 
Paid  H.  O.  Holmes,  clerk,  $15. 
Sold  Mdse.  to  Brett  &  Blish  at  30  days,  $1,240.50. 
Bought  Mdse.  of  C.  W.  Coffin  &  Co.,  4/10  N/30,  $2,16070. 
Received  cash  of  Brett  &  Blish  for  bill  of  January  14,  less  discount.     (Allow  the  discount  although  Brett  & 

Blish  are  one  day  late  in  remitting.) 

January  26. 
Gave  Brett  &  Blish  credit  for  goods  returned  $16.40.     (Debit  Sales  account.) 

January  30. 
Paid  H.  O.  Holmes  $15.    Mr.  Cooper  withdraws  $100  for  his  services.     (Debit  Expense  account.) 

INVENTORY  OF  MDSE.  ON  HAND,  JANUARY  30,  1918,  TAKEN  AT  COST,  $6,444.50. 


1151 


TRIAL  BALANCE  OF  B.  D.  PETERS,  DECEMBER  31,  1917 

Cash  $1,250.00 

A.  C.  Davis 425.60 

T.  B.  Walthers 560.00 

W.  A.  Seymour 215.40 

B.  A.  Salmon 675.80 

Notes  Receivable 42.50 

Furniture  and  Fixtures 1,000.00 

Cohen  &  Small $128.60 

Harrison  &  Co 250.90 

Notes  Payable 64.60 

B.  D.  Peters,  Capital 5,700.00 

Purchases  11,769.00 

Sales 13,250.00 

Expenses 3,455.80 

$19,394.10      $19,394.10 


Cost  of  Merchandise  on  hand  December  31,  1917 $3,214.26 


TRIAL  BALANCE  OF  A.  L.  FRENCH,  DECEMBER  31,  1917 

Cash  $2,578.95 

Accounts  Receivable 6,675.21 

Merchandise  Inventory  December  31,  1916 10,020.30 

Delivery  Equipment 1,800.00 

Furniture  and  Fixtures 2,500.00 

Accounts  Payable $4,275.60 

Notes  Payable 1,000.00 

A.  L.  French,  Capital 17,000.00 

Sales 53,650.90 

Sales  Returns 340.60 

Purchases   40,325.71 

Freight  Inward 625.80 

Delivery  Expense 1,058.20 

Selling  Expense 6,923.83 

General  Administrative  Expense 3,077.90 

$75,926.50      $75,926.50 

Cost  of  Merchandise  on  hand  December  31,  1917 $10,482.57 


[16] 


EXERCISE  NO.  101 
H.  C.  Chase 

Trial  Balance,  September  30,  1918 

Cash $428.65 

Accounts  Receivable 4,280.60 

Notes  Receivable 228.00 

Inventory,  July  1,  1918 2,800.00 

Office  Equipment 475.00 

Store  Equipment 650.00 

Delivery  Equipment 1,200.00 

Accounts  Payable $2,161.60 

H.  C.  Chase,  Capital 6,465.00 

H.  C.  Chase,  Personal 75.00 

Sales  (Dr.  $156.25,  Cr.  $13,365.99) 13,209.74 

Purchases  (Dr.  $9,661.55,  Cr.  $410.90) 9,250.65 

Freight  Inward 165.80 

Selling  Expense 1,675.00 

General  Administrative  Expense 510.00 

Purchase  Discount 245.68 

Interest  on  Notes  Receivable 2.28 

Loss  on  Bad  Accounts 345.60 


$22,084.30      $22,084.30 


Inventory  of  merchandise  on  hand  September  30,  1918,  taken  at  cost,  $3,060.49. 

Required: 

(a)  Working  sheet 

(b)  Profit  and  loss  statement 

(c)  Closing  entries 

"Loss  on  Bad  Accounts"  is  not  an  operating  expense  and  on  the  profit  and  loss  statement  should  be  placed 
under  "Other  Charges." 

The  debit  and  credit  postings  of  the  Sales  and  Purchase  accounts  are  to  be  used  in  the  profit  and  loss 
statement  only.    Use  balances  of  accounts  for  closing  entries. 


[17] 


PERCENTAGE 

Per  cent  is  the  common  name  for  hundredths. 

The  symbol  %  may  be  read  per  cent  or  hundredths. 

Percentage  is  the  process  of  computing  by  per  cents  or  by  hundredths. 

.50  may  be  read  fifty  hundredths,  fifty  per  cent  or  one  half. 

.045  may  be  read  four  and  one-half  per  cent,  four  and  one-half  hundredths  or  forty-five  thousandths. 

.005  may  be  read  one-half  of  one  per  cent  or  five  thousandths. 

The  terms  used  in  percentage  are  the  base,  the  rate,  and  the  percentage.  The  base  is  the  number  of  which 
a  per  cent  is  taken;  the  rate  is  the  number  of  hundredths  to  be  taken  of  the  base;  the  percentage  is  the 
result  obtained  by  taking  so  many  hundredths  or  a  certain  per  cent  of  the  base. 

In  the  expression  "10%  of  $200  is  $20,"  $200  is  the  base,  $20  is  the  percentage,  and  10%  is  the  rate. 

FINDING  THE  PERCENTAGE 

Multiply  the  base  by  the  rate  and  the  product  will  be  the  percentage. 

Example.    What  is  25%  of  $452? 

Solution.    25%  of  a  number  equals  .25  of  it. 

$452 
.25 


2260 
904 


$113.00=Answer. 

As  25%  equals  J4  of  100%,  it  is  obvious  that  if  $452  is  divided  by  4  the  result  will  be  the  same  as  multi- 
plying by  .25. 

4)452 


113 


IN  THE  MULTIPLICATION  OF  DECIMALS,  POINT  OFF  AS  MANY  PLACES  IN  THE  PRODUCT 
AS  THERE  ARE  DECIMAL  PLACES  IN  BOTH  MULTIPLICAND  AND  MULTIPLIER. 

Fractional  value  of  per  cents  frequently  occurring: 

Per  Cent  Fractional  Value  Per  Cent  Fractional  Value 

12  1/2  1/8  20  1/5 

25  1/4  16  2/3  1/6 

37  1/2  3/8  33  1/3  1/3 

62  1/2  5/8  66  2/3  2/3 

1.  A  hardware  merchant  compromised  with  his  creditors,  paying  33  1/3%  of  the  amount  of  his  debts.    If 
he  owed  A  $750,  B  $2,176.20,  and  C  $3,488.37,  how  much  did  each  receive? 

2.  A  merchant  paid  the  following  bills,  less  the  discounts  named :  $2,421.60  less  4%  ;  $210  less  3%  ;  $752.80 
less  3^2%.    What  was  the  net  amount  paid? 

3.  A  wholesale  grocer  bought  240  bbls.  of  flour  at  $10  per  bbl.    He  sold  66  2/3%  of  it  at  $12  per  bbl.  and 
the  remainder,  which  was  damaged,  for  $9  per  barrel.     Did  he  gain  or  lose  and  how  much  ? 

4.  The  net  sales  of  a  business  were  $125,640.90;  the  gross  profit  was  33  1/3%  of  the  net  sales,  and  the  net 
profit  17%  of  the  gross  profit.    What  was  the  net  profit? 

r  is  i 


5.  A  business  block  was  bought  for  $125,000.  38%  of  the  cost  was  spent  for  remodeling  and  the  block 
was  then  sold  for  $185,000.    How  much  was  gained? 

6.  What  is  115%  of  1,000? 

7.  What  is  120%  of  600;  of  2,100;  of  3,000? 

8.  Find  12%  of  2,800. 

9.  Find  20%  of  2,500. 
10.  Find  16  2/3%  of  200. 

FINDING  THE  RATE 

If  multiplying  the  base  by  the  rate  will  equal  the  percentage,  it  follows  that  if  the  percentage  is  divided 
by  the  base,  the  quotient  will  be  the  rate.  Thus  12%  of  125=15.  If  the  base  (125)  and  the  percentage  (15) 
were  given,  to  find  the  rate,  we  should  divide  the  percentage  by  the  base  as  follows : 

.12=12% 


125)15.00 
125 


250 
250 

0 

IN  DIVISION  OF  DECIMALS  POINT  OFF  AS  MANY  PLACES  IN  THE  QUOTIENT  AS  THE 
NUMBER  IN  THE  DIVIDEND  EXCEEDS  THOSE  IN  THE  DIVISOR 

What  per  cent  of : 

1.  8,000  is  2,400? 

2.  3,600  is  600? 

3.  1,312  is  328? 

4.  2,600  is  169? 

5.  The  net  sales  of  a  business  are  $75,280.60 ;  the  gross  profit  on  sales  is  $26,348.21 ;  the  operating  expenses 
are  $15,808.93;  the  net  profit  is  $10,539.28.  Find  (a)  the  rate  per  cent  of  gross  profit  on  sales  to  net  sales; 
(b)  the  rate  per  cent  of  operating  expenses  to  net  sales;  (c)  the  rate  per  cent  of  net  profit  to  net  sales. 

6.  In  question  No.  5  the  investment  of  the  proprietor  was  $52,696.42.  Find  the  rate  per  cent  of  net  profit 
to  investment. 

7.  An  agent  sold  a  parcel  of  real  estate  for  $10,500  and  received  $262.50  for  his  services.  What  per  cent 
did  he  receive  ? 

8.  A  and  B  engage  in  business  with  a  capital  of  $50,000.  A  invests  $26,000  and  B  the  remainder.  What 
per  cent  of  the  total  capital  did  each  invest? 

9.  A  house  was  bought  for  $3,500  and  sold  for  $4,200.    What  per  cent  was  gained  ? 

10.    A  traveling  salesman  earned  a  commission  of  $1,284.05  on  sales  of  $25,680.95.    What  per  cent  did 
he  receive  on  the  sales? 

Find  the  rate  per  cent  of  gross  profit  on  sales  to  net  sales  from  the  following  figures : 
Net  Sales  Gross  Profit  on  Sales 

11.  $140,000.00  $42,000.00 

12.  128,560.75  33,425.80 

13.  80,110.45  18,124.25 

[19] 


Find  the  rate  per  cent  of  cost  of  goods  sold  to  net  sales  from  the  following  figures : 

Net  Sales  Cost  of  Goods  Sold 

14.  $46,280.60  $27,768.36 

15.  64,258.69  41,318.34 

16.  7,540.80  4,237.93 
Find  the  rate  per  cent  of  net  profit  to  net  sales  from  the  following  figures : 

Net  Sales  Net  Profit 

17.  $41,480.29  $10,216.18 

18.  100,218.94  15,249.27 

19.  75,342.01  9,462.31 

FINDING  THE  BASE 

The  quotient  of  the  percentage  divided  by  the  rate  equals  the  base. 

Example:  45.3  is  20%  of  what  number? 
226.50=Base 


Solution :  .20)  45.30 

1.  If  the  attendance  in  the  Freshman  class  is  114  in  one  evening  and  that  number  is  95%  of  the  total 
number,  how  many  are  absent? 

2.  We  agree  to  give  a  customer  a  discount  of  2%  on  his  cash  payments  and  accordingly  he  remits  $298.90. 
What  amount  should  be  placed  to  his  credit?  (To  prove  the  answer,  find  2%  of  the  base,  and  deduct  the 
percentage  from  the  base.    The  result  will  be  $298.90.) 

3.  If  the  net  profit  is  $2,940  which  is  12%  of  the  sales,  what  is  the  amount  of  the  sales? 

4.  A  customer  remits  $596.82  to  pay  a  bill  on  which  there  is  allowed  a  discount  of  3%.  What  is  the 
amount  of  the  bill? 

5.  We  buy  real  estate  and  give  a  mortgage  for  $15,000  which  was  33  1/3%  of  the  price  paid  for  the  prop- 
erty.   What  was  the  price  paid? 

TRADE  DISCOUNT 

Trade  discount  is  a  deduction  from  the  catalog  or  list  price  in  order  to  arrive  at  the  actual  selling  price  of 
the  goods.  Different  conditions  as  to  the  quantity  of  goods  sold,  the  state  of  the  customer's  credit,  etc., 
cause  the  discounts  to  vary.  One  customer  may  receive  a  discount  of  25% ;  another  may  receive  25%  and 
10%.  Two  or  more  discounts  are  called  a  discount  series.  Trade  discounts  should  not  be  confused  with 
cash  discounts.  A  trade  discount  is  deducted  from  the  list  or  catalog  price  at  the  time  the  sale  is  made,  the 
net  amount  being  charged  to  the  customer.  A  cash  discount  is  a  deduction  made  from  the  amount  of  the 
bill  because  of  payment  in  cash  being  made  by  the  customer  in  a  certain  number  of  days  after  the  date  of 
the  bill. 

When  two  or  more  discounts  are  quoted,  the  first  one  is  computed  on  the  list  or  catalog  price ;  the  second 
on  the  remainder  after  deducting  the  first,  and  so  on. 

Example:  A  bill  of  electrical  goods  per  catalog  price  is  $490.80,  subject  to  a  discount  of  10%  and  5%. 
What  was  the  net  amount  of  the  bill? 

Solution :       $490.80 
10%  off  49.08 


$441.72 
5%  off  22.09 


$419.63  =  the  net  amount  of  the  bill. 

The  equivalent  of  a  series  of  discounts  may  be  found  as  follows : 

Example:  Find  a  single  rate  of  discount  equivalent  to  a  discount  series  of  10%  and  5%. 

[20] 


Solution :  Let  100%  represent  the  list  price.  Then  90%  equals  the  list  price  after  the  first  discount  has 
been  subtracted.  5%  of  90%  equals  4y2%,  which  subtracted  from  90%,  gives  85y2%.  l00%—85y2%= 
14^%,  the  single  discount  required. 

1.  Which  is  the  better  for  the  buyer  and  how  much,  a  single  discount  of  50%  or  a  discount  series  of  40%, 
10%  and  5%? 

2.  Goods  were  sold  subject  to  trade  discounts  of  20%,  and  10%.  If  the  total  discounts  allowed  amounted 
to  $91,  what  was  the  list  price? 

3.  Find  the  net  selling  price  of  an  article  listed  at  $630.00  subject  to  trade  discounts  of  33  1/3%,  10%, 
and  5%. 

INTEREST 

Interest  is  compensation  for  the  use  of  money  and  is  computed  at  a  certain  per  cent  of  the  sum  borrowed. 

In  business  12  months  of  30  days  each  or  360  days  are  considered  one  year.  This  is  not  exact  but  it  is 
used  because  convenient  and  lends  itself  readily  to  the  decimal  system  of  computing  interest. 

COMPUTATION  OF  TIME:  The  Negotiable  Instrument  Law  provides  that  where  a  note  or  draft  is 
payable  a  fixed  number  of  days  after  date  or  sight,  the  date  of  the  instrument  is  excluded  and  the  day  of 
payment  is  included  in  the  computation  of  time.  Thus  in  finding  the  date  of  maturity  of  a  note  dated 
April  10,  payable  in  10  days,  April  11  is  the  first  day  counted  and  April  20  the  last  day.  If  a  note  falls  due 
on  Saturday,  which  is  a  half  holiday,  and  is  paid  on  the  Monday   following,  two  days'  interest  are  added. 

Otherwise  than  in  the  above  case  there  seems  to  be  no  universal  method  of  calculating  time.  The  Months 
and  Days  Method  and  the  Exact  number  of  Days  Method  are  used  according  to  the  whim  of  the  individual 
making  the  calculation,  or  according  to  the  custom  of  a  particular  office  or  line  of  business. 

MONTHS  AND  DAYS  METHOD 

Example:     Find  the  time  from  April  8,  1917,  to  October  1,  1917. 

Solution :  From  April  to  May  8  is  one  month ;  to  June  8,  two  months ;  to  July  8,  three  months ;  to  August 
8,  four  months ;  to  September  8,  five  months.  There  are  22  days  remaining  in  September  and  one  in  October, 
making  23  days  which  added  to  the  months  previously  found,  give  the  time  as  five  months  twenty-three  days. 

Find  the  time  in  months  and  days  from 

1.  June  25,  1916,  to  June  1,  1917. 

2.  October  15,  1916,  to  December  31,  1916. 

3.  January  21,  1918,  to  September  30,  1918. 

4.  February  2,  1918,  to  October  1,  1918. 

EXACT  NUMBER  OF  DAYS  METHOD 

Example:     Find  the  time  from  April  8,  1917,  to  October  1,  1917. 

Solution:     number  of  days  remaining  in  April,  22 

number  of  days  in  May,              31 

"      M       "  June,             30 

"     "       "  July,              31 

"      "       "  August,         31 

"      "       H  September,   30 

"      "       r  October,          1 


Total  176  days 

Find  the  time  in  exact  number  of  days  from 

1.  July  5,  1917,  to  December  29,  1917. 

2.  May  2,  1917,  to  August  3,  1918. 

3.  September  30,  1917,  to  November  30,  1917. 

4.  January  1,  1918,  to  October  1,  1918. 

[21] 


COMPUTING  INTEREST 

There  are  two  general  methods  of  calculating  interest,  the  Government  or  Accurate  Method  and  the 
Decimal  Method.  There  are  variations  of  the  decimal  method  but  they  all  arrive  at  the  same  result. 

THE  DECIMAL  SYSTEM 

THE  DECIMAL  SYSTEM  OF  COMPUTING  INTEREST  used  in  ordinary  business  transactions  is 
based  upon  the  fact  that  the  interest  on  one  dollar  at  6%  for  16  2/3  years  will  equal  one  dollar.  In  other 
words,  any  sum  drawing  interest  at  6%  will  in  16  2/3  years  (200  months)  gain  a  sum  equal  to  itself.  Then 
the  interest  for  20  months  (1/10  of  200  months)  will  equal  1/10  of  the  principal.  The  interest  for  two  months 
will  equal  1/100  of  the  principal,  and  the  interest  for  6  days  (1/10  of  two  months)  will  equal  1/1,000  of  the 
principal.    360  days  to  the  year  are  used  with  this  method. 

Example:     Find  the  interest  on  $1,250  for  3  months,  18  days  at  6%. 

Solution:  Moving  the  decimal  point  in  the  principal  two  places  to  the  left  gives  $12.50  as  the  interest 
for  two  months.  One-half  of  $12.50  or  $6.25  equals  the  interest  for  one  month.  Moving  the  decimal  point 
in  the  principal  three  places  to  the  left  gives  the  interest  for  six  days  which  is  $1.25. 

To  arrive  at  the  interest  for  18  days  we  multiply  $1.25  by  3  which  gives  $3.75  as  the  interest  for  18  days. 

The  solution  may  be  placed  in  a  concise  form  as  follows : 
$1,250  =  Principal 


$12.50  =  Interest  for  two  months 
6.25  —  Interest  for  one  month 
3.75  =  Interest  for  18  days 


$22.50  =  Interest  for  three  months,  eighteen  days. 

IN  COMPUTING  RATES  OTHER  THAN  6%,  find  6%  first,  then  add  or  subtract  as  the  case  requires. 
If  5%  is  wanted  compute  interest  at  6%  and  divide  by  6,  giving  1  %.  Subtract  the  1%  from  the  6%.  If 
7%  is  called  for,  divide  as  before  and  add  the  result  to  the  6%.  If  4^%  is  required,  divide  6%  by  4  which 
gives  \y2%.    Subtract  the  \y2%  from  6%  and  the  result  is  4y2%. 

In  the  following  examples  find  the  exact  number  of  days  between  the  dates  given  and  reduce  to  months 
and  days,  allowing  30  days  to  a  month,  360  days  per  year,  and  compute  interest  by  the  decimal  method. 

Time  Rate 

January         1,  1918,  to  February  5,  1918  6% 

May  9,  1918,  to  June        30,  1918  5% 

November  20,  1917,  to  February  2,  1918  6% 

December   15,  1917,  to  March       8,  1918  3% 

January        3,  1918,  to  March     10,  1918  4y2% 

A  variation  of  this  method  is  to  point  off  three  places  in  the  principal,  multiply  by  the  number  of  days  and 
divide  by  6. 

Compute  interest  on  the  following  amounts  for  the  time  mentioned,  using  the  months  and  days  method 
of  findng  time,  360  days  to  the  year. 

25,  1918,  to  December 31,  1918  7% 

1,  1918,  to  May            6,  1918  8% 

1,  1918,  to  February  24,  1918  6% 

20,  1918,  to  June          15,  1918  4% 

1,  1918,  to  Septembers,  1918  5% 
[22] 


Principal 

1. 

$3,000.00 

2. 

2,948.60 

3. 

7,269.75 

4. 

4,375.90 

5. 

6,429.40 

1. 

$2,864.32 

October 

2. 

2,000.00 

February 

3. 

5,520.80 

February 

4. 

8,143.70 

March 

5. 

9,486.00 

June 

ACCURATE  INTEREST 

In  all  transactions  involving  the  computation  of  interest  the  U.  S.  Government  uses  the  actual  number  of 
days,  365  days  to  the  year. 

ACCURATE  INTEREST  METHOD.  To  find  the  accurate  interest  for  an  exact  number  of  days,  com- 
pute the  interest  on  the  amount  for  one  year  at  the  given  rate,  divide  this  result  by  365  to  obtain  the  inter- 
est for  one  day  and  multiply  the  quotient  by  the  required  number  of  days.  An  easier  working  method, 
however,  is  to  multiply  the  interest  of  one  year  by  the  number  of  days  required  and  divide  by  365,  thus 
reversing  the  order  of  the  multiplication  and  division.  Example:  Find  the  accurate  interest  of  $1,350.68 
from  May  10,  1917,  to  September  5,  1917,  at  5%.    The  number  of  days  is  found  as  follows: 


May, 

21  days 

June, 

30  days 

J«iy, 

31  days 

August, 

31  days 

September, 

5  days 

118  days 

The  interest  on  $1,350.68  for  one  year  at  5%  is  $67,534.     The  problem  may  now   be  expressed   in   this 
manner : 

67.534  X  118 


1  365 


$67,534  the  interest  for  one  year  multiplied  by  118,  the  number  of  days  ss  $7,969,012.     Dividing  the  last 
product  by  365  gives  $21.83,  the  answer  desired. 

Find  the  accurate  interest  on  the  following  amounts  for  the  time  and  rate  mentioned. 

Principal  Time  Rate 

1.  $1,892.50  January  1,  1917,  to  May             2,  1917  Sy2% 

2.  32,876.40  March  1,  1917,  to  December     4,  1917  6% 

3.  10,743.60  October  16,  1917,  to  November  13,  1917  7% 

4.  2,594.16  April  1,  1917,  to  January        3,  1918  6% 

5.  14,641.20  Nov.        29,  1917,  to  April  3,  1918  4^% 

BANK  DISCOUNT 

There  is  no  standard  method  of  computing  time  and  interest  used  by  banks  in  discounting  notes  except 
as  provided  by  the  Negotiable  Instrument  Law  in  reckoning  time  on  notes  and  drafts  payable  in  a  certain 
number  of  days.  There  is  a  tendency,  however,  towards  the  use  of  accurate  interest. 

In  the  following  examples  first  find  the  date  of  maturity  of  the  note  by  counting  the  time  as  expressed  in 
the  note,  forward  from  the  date  of  the  note ;  then  find  the  time  in  exact  number  of  days  between  the  date 
the  note  was  discounted  and  the  date  of  maturity.  Reduce  this  time  to  months  and  days  and  compute  the 
discount  for  that  time,  decimal  method  30  days  to  a  month,  on  the  amount  due  at  maturity.  If  the  note 
is  not  interest  bearing,  the  discount  is  reckoned  on  the  amount  of  the  note.  If  the  note  bears  interest  the 
discount  will  be  figured  on  the  amount  of  the  note  plus  the  interest  on  that  amount  for  exact  number  of 
days  from  the  date  of  the  note  until  the  date  of  maturity. 

Example:  Note  of  Blish  &  Co.  for  $6,475  at  60  days,  dated  October  7,  1917,  discounted  October  15,  1917, 
at  6%. 

Solution:  Counting  60  days  forward  from  the  date  of  the  note  gives  December  6,  1917,  as  the  date  of 
maturity. 

[23] 


From  October  15,  the  day  of  discount,  to  December  6,  the  day  of  maturity,  the  time  is  52  days  or  1 
month,  22  days. 

$6,475  ==  Principal 


$32,375  =  Interest  for  one  month 
21.583  =  Interest  for  twenty  days 
2.158  =  Interest  for  two  days 


$56,116  =  Answer. 

The  above  answer  should  be  read  $56.12  as  five  mills  or  more  in  a  final  result  are  considered  as  one  cent. 

Example:  Sampson  &  Snow's  note  at  three  months  date  October   12,   1917,  bearing  interest  at  5%, 
discounted  October  15,  1917. 

Solution :  Note  due  January  12,  1918.    October  12  to  January  12  =  92  days  =  3  months,  2  days. 

Interest  3  months,  2  days,  at  5%  on  $4,250  =  $54.31  which  added  to  $4,250  =  $4,304.31. 

The  time  from  October  15  (date  of  discount)  to  January  12  (date  of  maturity)  is  89  days  =  2  months, 
29  days.    Discount  rate  6%. 

$4,304.31  =  Amount  due  at  maturity 


43.043  =  Interest  for  2  months 
21.521  =  Interest  for  1  month 


64.564 

.717  =  Less  interest  for  1  day 


$63.85  —  Discount  on  Sampson  &  Snow's  note. 

The  discount  rate  is  commonly  6%  but  any  other  rate  may  be  agreed  upon. 

For  convenience  in  computing  interest,  banks  usually  disregard  a  fraction  of  a  dollar  less  than  50  cents ; 
but  if  the  fraction  is  50  or  more  cents  it  is  considered  as  another  dollar.  In  this  work,  however,  the  exact 
amount  will  be  used. 


1. 
2. 
3. 
4. 
5. 
6. 
7. 
8. 
9. 
10. 


Find  the  discount  on  the 
Face  of  Note 
$3,400.00 


1,625.00 
4,617.80 
2,914.20 
2,914.20 
7,218.90 
6,429.40 
1,627.64 
1,250.00 
1,872.40 


following  notes : 
Date 
January  25 
February  1 
March  10 
October  1 
October  1 
May  3 

June  16 

September  1 
October  3 
October     29 


Time 

3  months 
60  days 
90  days 
60  days 
60  days 

4  months 
30  days 

2  months 

3  months 
60  days 


Discounted 

Interest 

January 

28 

6% 

February 

1 

March 

12 

October 

4 

5% 

October 

4 

May 

4 

4% 

June 

17 

September 

1 

October 

5 

6% 

October 

30 

Find  the  discount  on  the  following  drafts: 

(The  date  of  maturity  is  found  by  adding  the  time  to  the  date  of  acceptance.) 

Amount  Time  after  sight  Accepted  Discounted 

1-  $2,524.20  30  days  June  10,  1918  June  11,  1918 

2.  1,640.35  60  days  June  14,  1918  June  17,  1918 

3.  3,429.60  90  days  July     1,  1918  July     2,  1918 

(Falls  due  on  Sunday  and  is  paid  on  Monday  following) 

4.  672.90  60  days  July     5,  1918  July     6,  1918 

5.  4,261.75  30  days  May    9,  1918  May  11,  1918 

[24] 


To  find  the  amount  for  which  a  note  to  be  discounted  should  be  written  in  order  to  borrow  a  certain  sum : 
Divide  the  amount  to  be  borrowed  by  the  net  proceeds  of  one  dollar  for  the  given  rate  and  time. 
You  have  your  note  at  3  months  discounted  at  a  bank  and  realize  $5,000.    The  discount  rate  being  6%, 
what  is  the  amount  of  the  note? 

Solution : 

$1.00  less  interest  for  three  months  at  6% =.985 

$5076.14 


.985)5000.00000 
4925 


7500 
6895 

6050 
5910 

1400 
985 

4150 
3940 

210 

Answer :    Amount  of  note,  $5,076.14. 

Proof :    $5,076.14  less  interest  for  three  months  at  6%  =$5,000. 


[25] 


EXERCISE  NO.  102 
Journalize  the  following  transactions: 

October  1,  1915. 
S.  W.  Beaman,  one  of  your  customers,  returns  goods  to  you  which  arrived  damaged  $45.85. 

October  2. 
You  receive  a  note  of  $275.00  from  Martin  &  Co.  which  you  immediately  transfer  to  J.  A.  Curry. 

October  3. 
You  return  goods  to  Maynard  &  Warner  which  were  not  up  to  sample  exhibited,  $38.60. 

October  4. 
Purchase  Discount  was  debited  $125.60  instead  of  Sales  Discount.    Correct  the  error. 

October  5. 

You  took  up  your  note  of  $450.00  to  E.  W.  Lane  by  giving  him  merchandise  $300  and  a  new  note  at  60 
days  for  the  balance. 

October  6. 

The  Wilton  Woolen  Company  has  called  our  attention  to  an  error  in  our  bill  of  October  3rd  in  which  we 
charged  them  $1.75  each  for  one  dozen  Stilson  wrenches.  We  had  previously  quoted  the  price  as  $1.25  each. 
Make  entry  to  correct  error. 

October  7. 

J.  H.  Roberts  gives  us  on  account  Jones  &  Co.'s  note  for  $600  at  three  months  dated  September  25.  We 
allow  Roberts  the  present  worth  of  the  note,  $592.10. 

October  8. 

On  merchandise  previously  sold  and  charged  to  Jones  &  Co.  you  have  agreed  to  pay  freight.  You  did  not 
prepay  it  and  Jones  &  Co.  notify  you  that  they  have  paid  freight,  $5.10. 

October  9. 
We  buy  merchandise  of  Soames  &  Smith  $2,000,  giving  in  payment  our  note  at  two  months. 

October  10. 

The  Derby  Desk  Company  allow  us  a  rebate  of  $10  on  an  office  desk  which  has  been  credited  to  the  Derby 
Desk  Co.  but  has  not  been  paid  for. 


[26] 


EXERCISE  NO.  103 
C.  W.  Cutter 

Trial  Balance,  June  30,  1918. 

Cash  $729.68 

Accounts  Receivable 5,586.20 

Notes  Receivable 480.00 

Inventory,  December  31,  1917  (cost) 3,186.25 

Delivery  Equipment 650.00 

Furniture  and  Fixtures 775.00 

Accounts  Payable $2,075.80 

C.  W.  Cutter,  Capital 8,050.00 

Purchases  15,142.60 

Purchase  Returns  210.60 

Purchase  Discounts    165.00 

Sales    21,578.75 

Sale  Returns   429.42 

Selling  Expense 3,188.00 

General  Administrative  Expense 1,800.00 

Loss  on  Bad  Accounts 125.00 

Interest 12.00 


$32,092.15      $32,092.15 
Merchandise  Inventory,  June  30,  1918 — $3,360.95   (cost) 

Required: 

(a)  Working  sheet. 

(b)  Balance  sheet. 

(c)  Closing  entries. 

(d)  Find  per  cent  of  cost  of  doing  business  to  net  sales. 

(e)  Find  per  cent  of  net  profit  to  net  sales, 
(f  )  Find  rate  of  turnover. 

N.  B.    Do  not  abbreviate  on  balance  sheets  and  profit  and  loss  statements.    Do  not  forget  punctuation. 


[27] 


QUIZ  QUESTIONS  IN  ACCOUNTING  TECHNIQUE 
FRESHMAN  CLASS 

1.  What  is  a  post  mark  ? 

2.  Where  is  a  post  mark  placed? 

3.  What  does  it  indicate? 

4.  When  should  it  be  made? 

5.  What  is  a  journal  ? 

6.  What  is  a  ledger  ? 

7.  What  is  the  balance  of  an  account? 

8.  Give  a  rule  for  debiting  and  crediting  accounts. 

9.  Into  what  account  are  the  accounts  which  affect  proprietorship  closed  at  the  end  of  the  accounting  period  ? 

10.  Into  what  account  is  the  profit  and  loss  account  closed? 

11.  Do  business  earnings  appear  as  a  debit  or  a  credit  in  income  or  revenue  accounts? 

12.  Define  expense. 

13.  To  which  side  of  the  expense  account  are  expenses  posted? 

14.  What  becomes  of  these  expenses  at  the  end  of  the  business  period  when  the  expense  account  is  closed? 

15.  May  there  be  more  than  one  expense  account? 

16.  Give  the  names  of  several  expense  accounts. 

17.  What  is  the  balance  of  the  profit  and  loss  account  called? 

18.  What  is  an  account  receivable? 

19.  What  is  an  account  payable  ? 

20.  What  is  debited  to  a  notes  receivable  account  ? 

21.  What  is  credited  to  a  notes  receivable  account? 

22.  Of  what  does  the  balance  of  the  notes  receivable  account  consist  and  is  it  an  asset  or  a  liability? 

23.  What  is  debited  to  a  personal  account  ? 

24.  What  is  credited  to  a  personal  account  ? 

25.  When  is  the  balance  of  a  personal  account  an  asset? 

26.  When  is  the  balance  of  a  personal  account  a  liability? 

27.  What  is  posted  to  the  sales  account? 

28.  Is  the  balance  of  the  sales  account  an  asset  or  a  liability? 

29.  What  is  posted  to  the  purchases  account  ? 

30.  What  is  interest? 

31.  What  is  discount  ? 

32.  What  is  posted  to  an  interest  account  ? 

33.  Is  a  credit  balance  of  an  interest  account  an  asset,  liability,  expense  or  income  ? 

34.  What  is  a  trial  balance? 

35.  Does  the  trial  balance  prove  the  accuracy  of  the  accounts? 

36.  What  does  the  trial  balance  prove  ? 

37.  If  your  trial  balance  were  wrong  how  would  you  know  it  and  how  would  you  proceed  to  find  the  error? 

38.  Why  do  business  concerns  commonly  use  more  than  one  book  of  original  entry? 

39.  What  word  is  used  to  designate  all  kinds  of  things  that  have  value  to  a  business? 

40.  What  is  a  liability? 

41.  Into  what  classes  are  assets  divided  on  the  balance  sheet? 

42.  Define  the  different  classes  of  assets  on  a  balance  sheet. 

43.  Define  the  different  classes  of  liabilities  on  a  balance  sheet. 

44.  Name  the  three  divisions  or  parts  of  a  balance  sheet. 


[28] 


EXERCISE  NO.  104 

J.  B.  McLean's  Trial  Balance,  September  30,  1918.  (After  Adjusting) 

Real  Estate $25,000.00 

Store  Fixtures 4,250.00 

Reserve  for  Depreciation  of  Store  Fixtures $600.00 

Motor  Trucks 2,850.00 

Reserve  for  Depreciation 412.50 

Office  Equipment   1,850.00 

Reserve  for  Depreciation  of  Office  Equipment 140.00 

Cash 2,1 50.48 

Accounts  Receivable 27,725.82 

Reserve  for  Loss  on  Bad  Accounts 514.50 

Notes  Receivable 325.00 

Merchandise  Inventory,  June  30,  1918 12,428.50 

Sales 48,103.48 

Sale  Returns  1,740.60 

Purchases   33,460.20 

Purchase  Returns 2,450.10 

Freight  In 385.90 

Mortgage  Payable 10,000.00 

Accounts  Payable  17,920.80 

J.  B.  McLean,  Capital 43,000.00 

J.  B.  McLean,  Personal 600.00 

Selling  Expense 6,363.54 

General  Administrative  Expense 2,840.00 

Discounts  on  Purchases 1,338.40 

Delivery  Expense   818.00 

Discount  on  Sales 969.44 

Insurance  Unexpired   35.60 

Garage  Supplies  on  Hand 22.20 

Loss  on  Bad  Accounts 514.50 

Interest 150.00 

$124,479.78    $124,479.78 

Merchandise  Inventory,  September  30,  1918,  $14,260.28. 

Required: 

(a)  Working  sheet. 

(b)  Profit  and  loss  statement. 

(c)  Closing  entries. 

The  above  trial  balance  was  taken  after  the  adjusting  entries  were  made  and  posted.  The  student  there- 
fore will  make  only  the  usual  closing  journal  entries. 

Mr.  McLean  wishes  you  to  close  the  net  profit  or  net  loss  into  his  personal  account  and  the  resulting 
balance  of  the  personal  account  into  his  capital  account. 


129] 


TYPICAL  ADJUSTING  ENTRIES 

Adjusting  Journal  entries  should  be  explained  in  such  a  manner  that  the  essential  points  of  the  adjustment 
may  be  understood  by  one  not  familiar  with  the  transaction  and  the  data  furnished  should  be  of  such  a  char- 
acter that  the  amount  of  the  entry  can  be  computed  therefrom. 

Loss  on  Bad  Accounts $1,052.90 

Reserve  for  Loss  on  Bad  Accounts $1,052.90 

To  adjust  the  Reserve  account  to  agree  with  1%  of  the  net  sales: 

1%  of  net  sales $1,146.90 

Balance  of  Reserve  account 94.00 

Amount  necessary  to  adjust $1,052.90 

Depreciation  of  Store  Equipment 79.00 

Reserve  for  Depreciation  of  Store  Equipment 79.00 

General  Office  Expense 37.50 

Reserve  for  Depreciation  of  Office  Equipment 37.50 

Estimated  depreciation  of  above  equipment  for  year  ending  12-31-16: 

Figured  on  cost  of  store  equipment $790.00 

and  office  equipment 375.00 

at  the  rate  of  10%  per  annum 

Advance  Advertising  500.00 

Advertising   500.00 

To  set  up  as  an  asset  y$  of  the  advertising  already  paid  for,  it  being  esti- 
mated that  this  proportion  influences  the  sales  of  the  next  fiscal  period. 

Taxes  on  Stock 82.50 

Taxes  Accrued 82.50 

Accrued  taxes  April  1-June  30=3  mos,  calculated  on  basis  of  rate  last 
year,  $16.50  per  thousand  on  $20,000.    One  year  $330-^4=3  mos.,  $82.50 

Interest  on  Mortgage  Payable 104.17 

Interest  Accrued  on  Mortgage  Payable 104.17 

Interest  accrued  on  mortgage  payable  of  $25,000  from  5-31-16  to  6-30-16 
=1  month  at  5%=$104.17  as  above. 

Delivery  Expense  520.00 

Reserve  for  Depreciation  of  Motor  Trucks 520.00 

To  provide  for  depreciation  of  motor  trucks  at  the  rate  of  20%  per  annum 
on  equipment  costing  $2,600. 

Interest  on  Notes  and  Loans  Payable 208.33 

Interest  Accrued  on  Notes  Payable 208.33 

Interest  accrued  on  Note  of  $50,000  to  First  National  Bank,  interest  5%, 
from  5-31-16  to  6-30-16=30  days=$208.33. 

Inward  Freight  732.00 

Outward  Freight 1,098.00 

Delivery  Expense  1,830.00 

To  distribute  Delivery  Expense  on  the  basis  of  40%  to  Inward  Freight 
and  60%  to  Outward  Freight. 

It  is  not  well  to  attempt  to  apply  the  principles  of  debit  and  credit  to  closing  and  adjusting  entries  as  such 
entries  do  not  represent  business  transactions  and  are  made  for  the  purpose  of  computing  the  results  of  the 
business  period. 

[30] 


EXERCISE  NO.  105 

Charles  B.  Annis,  Trial  Balance  December  31,  1918 

Land  and  Buildings $10,000.00 

Tools  and  Implements 750.00 

Horse  and  Wagon 300.00 

Furniture  and  Fixtures 100.00 

Cash    . 893.45 

Accounts  Receivable 3,480.90 

Notes  Receivable 200.00 

Inventory  June  30,  1918 8,241.65 

Mortgage  Payable $3,000.00 

Accounts  Payable  2,480.50 

Notes  Payable 300.00 

Charles  B.  Annis,  Capital 14,813.74 

Charles  B.  Annis,  Drawings 750.00 

Purchases   12,460.75 

Purchase  Returns  250.00 

Sales    23,370.71 

Sale  Returns 1,740.80 

Freight  Inward  468.00 

Purchase  Discount  629.50 

Interest   180.00 

Selling  Expense 4,480.60 

Administrative  Expense 349.00 

Loss  on  Bad  Accounts 449.30 

$44,844.45      $44,844.45 


Inventory  December  31,  1918 $7,260.55 

Required: 

(a)  Working  sheet. 

(b)  Profit  and  loss  Statement. 

(c)  Balance  sheet. 

(d)  Closing  entries. 

Place  the  fixed  assets  first  on  the  balance  sheet. 


[31J 


EXERCISE  NO.  106 
T.  B.  Witherspoon 

Trial  Balance  June  30,  1917  (After  Adjusting) 

Cash $1,197.00 

Customers'  Accounts 12,295.60 

Bills  Receivable    . . . . ' 101.00 

Merchandise  on  Hand  December  31,  1916  (Cost) 3,307.50 

Furniture  and  Fixtures  (Cost) 1,250.00 

Horses  and  Wagons  (Cost) 1,350.00 

Accounts  Payable $9,649.70 

T.  B.  Witherspoon,  Capital 10,605.63 

T.  B.  Witherspoon,  Drawings 600.00 

Purchases 19,050.75 

Sales    24,242.80 

Interest   16.72 

Expenses 2,800.00 

Salaries  2,806.00 

Insurance  Unexpired  25.00 

Loss  on  Bad  Accounts 172.00 

Reserve  for  Depreciation  of  Furniture  and  Fixtures 162.50 

Reserve  for  Depreciation  of  Horses  and  Wagons 187.50 

Reserve  for  Loss  on  Bad  Accounts 105.00 

Stable  Expenses 300.00 

Cash  Discounts  on  Purchases 285.00 


$45,254.85      $45,254.85 


Cost  of  merchandise  on  hand  June  30,  1917 $2,560.75 

Required: 

(a)  Profit  and  loss  statement. 

(b)  Balance  sheet. 

(c)  Closing  entries. 

(d)  Questions  answered. 

1.  What  in  your  opinion  is  the  cause  of  the  trouble  in  the  above  business? 

2.  If  Mr.  Witherspoon  should  apply  to  you  for  a  loan  of  $2,000  to  relieve  his  financial  distress  do  you 
think  it  would  be  safe  to  do  so?    Give  full  reasons  for  your  answer. 


[32] 


EXERCISE  NO.  107 

Make  entries  in  Journal  form  with  full  explanations  for  the  following  transactions : 

October  1, 1918 

The  old  books  being  closed,  you  desire  to  open  a  new  set.  Your  balance  sheet  shows  assets  and  liabilities 
as  follows:  Cash  $642,  Accounts  Receivable  $6,250,  Notes  Receivable  $348.50,  Merchandise  on  hand  (cost) 
$3,260.75,  Furniture  and  Fixtures  $550,  Horse  and  Wagon  $350,  Accounts  Payable  $4,128.60,  Notes  Pay- 
able $1,000.     . 

Make  entry  to  open  new  books. 

October  2. 

J.  M.  Johnson  has  failed  owing  you  $368  and  pays  50%.  You  receive  from  him  the  Boston  Iron  Com- 
pany's note  for  $184  in  full  settlement.     Make  entry  for  settlement. 

October  3. 
The  First  National  Bank  has  discounted  your  note  of  this  date  at  two  months  for  $750  at  6%. 

October  4. 

The  First  National  Bank  has  discounted  Holmes  and  Company's  note  in  your  favor,  face  $3,275,  time  60 
days  at  6%. 

October  5. 

A  note  made  by  the  Liverpool  Bridge  Co.  for  $1,260  at  90  days  in  your  favor  and  which  the  First  National 
Bank  had  discounted,  the  maker  cannot  pay.  (1)  You  send  a  check  to  the  bank  to  pay  the  note  and  the  note 
thus  obtained  is  handed  back  to  the  Liverpool  Bridge  Co.  (2)  In  exchange  the  Bridge  Co.  gives  you  $500 
cash  and  a  new  note  at  30  days  for  an  amount  which  includes  the  balance  due  plus  30  days'  interest.  Make 
entries  for  Nos.  1  and  2. 

•  October  6. 

You  have  received  a  note  for  $1,256.80  at  60  days  made  by  John  Baynes,  one  of  your  customers.  The  note 
is  dated  October  4,  bears  interest  at  5%  and  is  discounted  October  6.  Make  entries  for  discounting  the  note 
at  6%. 

October  7. 

Haines  &  Co.  credit  you  for  goods  returned  $104. 

October  8. 

You  accept  a  draft  at  60  days  sight  drawn  by  the  Edgeworth  Pottery  Co.  in  favor  of  the  First  National 
Bank,  for  $472. 

October  9. 
Received  cash  in  payment  of  Sircom  &  Company's  note  $212. 

October  10. 

You  receive  from  Simpson  &  Co.  on  account  Silas  Cohen's  note  in  their  favor  dated  October  1,  at  four 
months  for  $721.48,  which  they  have  transferred  to  you  by  indorsement.  You  credit  Simpson  &  Co.  for  the 
present  worth  of  the  note. 


[33] 


EXERCISE  NO.  108 
A.  B.  Martin 

Footing  of  Accounts,  June  30,  1918  (After  Adjusting) 

Dr.  Cr. 

Cash    $11,447.00      $10,250.00 

Customers'  Accounts - . . .  14,756.40        12,460.80 

Bills  Receivable 411.00             310.00 

Furniture  and  Fixtures 290.00               40.00 

Merchandise  on  hand  December  31,  1917  (cost) 3,307.50 

Horse  and  Wagon  (cost) 350.00 

Accounts  Payable  8,142.60          8,792.30 

A.  B.  Martin,  Capital 4,795.63 

A.  B.  Martin,  Drawings 600.00 

Purchases  9,390.75             340.00 

Sales   305.60        14,548.40 

Interest   6.72 

Expenses    1 ,800.00 

Salaries  806.00 

Insurance  Unexpired   25.00 

Loss  on  Bad  Accounts 172.00 

Reserve  for  Depreciation  of  Furniture  and  Fixtures 40.00             102.50 

Reserve  for  Depreciation  of  Horse  and  Wagon 87.50 

Reserve  for  Loss  on  Bad  Accounts 105.00 

Stable  Expenses   180.00 

Cash  Discounts  on  Purchases 185.00 

$52,023.85      $52,023.85 
Cost  of  Merchandise  on  hand  June  30,  1918 $2,560.75 

Required: 

(a)  Trial  balance. 

(b)  Profit  and  loss  statement. 

(c)  Balance  sheet. 

(d)  Closing  entries  on  journal  paper. 

(e)  Answers  to  questions. 

1.  Explain  how  you  would  account  for  the  fact  that  loss  on  bad  accounts  shows  a  debit  balance  of  $172, 
while  reserve  for  loss  on  bad  accounts  has  a  credit  balance  of  only  $105. 

2.  How  do  you  account  for  the  difference  between  the  amount  of  sales  and  the  amount  charged  to  cus- 
tomers' accounts? 

3.  Is  the  merchandise  on  hand  December  31,  1917,  an  asset  at  the  time  of  closing  the  books  June  30, 
1918?     Give  reason  for  your  answer. 

4.  What  expenses  have  been  posted  to  the  expense  account? 

Mr.  Martin  instructs  you  to  close  his  net  profit  and  his  drawings  account  into  the  capital  account. 


[34] 


EXERCISE  NO.  109 
G.  C.  Cole 

Trial  Balance  October  31,   1917 

Cash    $4,672.04 

Accounts  Receivable 7,569.05 

Notes  Receivable 142.80 

Furniture  and  Fixtures 364.00 

Saxon  &  Company $122.50 

Lever  Bros 1,023.80 

B.  B.  Pierce  &  Company 3,024.62 

Park  &  Tilford 2J218.14 

Notes  Payable  350.00 

G.  C.  Cole,  Capital 18,000.00 

Sales 41,270.60 

Sale  Returns  178.00 

Inventory  (January  1,  1917) 13,150.48 

Purchases  37,642.50 

Purchase   Returns 1,183.60 

Cash  Discount  on  Purchases 1,592.41 

Cash  Discount  on  Sales 670.50 

Freight   In 342.80 

Express  Out   271.50 

Selling  Expense 2,782.00 

General   Administrative   Expense 1,000.00 

$68,785.67      $68,785.67 
Merchandise  inventory  October  31,  1917 $15,480.75 

Required: 

(a)  Ledger  accounts  (six  accounts  to  a  ledger  page). 

(b)  Profit  and  loss  statement. 

(c)  Balance  sheet. 

(d)  Closing  entries. 

Open  ledger  accounts  directly  from  the  trial  balance  using  "T.  B."  in  the  folio  column.  After  the  clos- 
ing entries  are  posted,  rule  off  the  accounts  that  balance  in  the  ledger. 

The  transactions  given  below  form  a  continuation  of  the  business  conducted  by  G.  C.  Cole.  The  student 
should  use  a  journal  (two  pages),  cash  book  (two  opposite  pages),  purchase  book  (one  page),  and  a  sales 
book  (one  page).  On  each  page  of  the  cash  book  rule  two  additional  money  columns  making  a  four  column 
cash  book.  Each  of  the  extra  columns  should  be  one  inch  wide,  2/8  in.  for  the  cents,  6/8  in.  for  the  dollars. 
The  money  columns  should  be  headed  from  left  to  right  on  the  cash  received  page  as  follows :  Accounts 
Receivable  Cr.,  Sundry  Credits,  Discounts  on  Sales,  Net  Receipts ;  on  the  cash  payments  page,  Administrative 
Expense  Debit,  Sundry  Debits,  Discount  on  Purchases,  Net  Payments. 

Use  ledger  already  made  for  a  general  ledger  in  which  the  account  headed  "Accounts  Receivable"  is 
a  "controlling"  account  and  contains  a  summary  of  all  the  accounts  in  the  sales  ledger.  Prepare  a  sales 
ledger  using  one  double  sheet  of  ledger  paper  containing  the  following  customers'  accounts  with  balances 
as  of  November  1,  1917.  Allow  eight  lines  to  each  account.  Number  the  pages  of  the  general  ledger  1-4 
and  the  pages  of  the  sales  ledger  5-7;  also  number  the  journal  ruled  pages  consecutively. 


[35] 


Holden  &  Bliss $1,640.25 

Charles  T.  Johnson 1,420.67 

John  B.  Wise 2,241.08 

Ellison  &  Co 1,291.64 

C.  A.  Weed 250.00 

Foss  &  Daniels 725.41 


$7,569.05 


Notice  that  the  sum  of  the  above  balances  is  the  same  as  the  balance  of  the  Accounts  Receivable  account 
on  the  trial  balance. 

Problem  should  be  complete  in  every  detail  when  passed  in.  Post  marks,  dates,  ruling,  explanations 
of  journal  entries,  etc.,  must  not  be  omitted.  Technique,  neatness,  and  arrangement  will  be  considered  in 
grading.  Be  sure  that  you  understand  the  controlling  account  (Accounts  Receivable)  and  the  manner  of 
posting  to  it. 

Required: 

(a)  Make  entries  in  appropriate  book  for  the  transactions  given  below. 

(b)  Post  into  general  and  sales  ledgers. 

(c)  Make  trial  balance 

(d)  Foot  and  rule  books  of  original  entry. 

November  1. 

G.  C.  Cole  agrees  to  admit  Samuel  C.  Locke  as  a  partner  in  the  business,  the  firm  to  be  known  as  Cole 
and  Locke.  Locke  on  his  part  contributes  to  the  capital  of  the  concern  an  amount  equal  to  one-half  of  the 
net  worth  of  the  business  according  to  the  balance  sheet  of  October  31,  as  follows: 

A  three  months'  note  for  $5,244.79  dated  October  1,  1917,  made  by  the  Acme  Fruit  Co.  and  bearing 
interest  at  7%.  (Mr.  Locke  is  to  be  credited  for  interest,  one  month — debit  Interest  Accrued) ;  also  a 
note  for  $5,469.41  at  20  days  bearing  interest  at  6%,  made  by  Locke,  payable  to  Cole  and  Locke  and 
dated  November  1,  1917.  It  is  also  agreed  that  the  profits  shall  be  divided  or  the  losses  borne,  in  the  same 
proportion  as  their  capital  investments. 

Journal  entries  must  be  fully  explained 

November  2. 
Insured  stock  of  merchandise  in  store  for  $12,000.    Paid  premium  in  cash  $90. 

November  3. 
Sold  Nelson  &  Stern  Mdse.  2/15  N/60,  $1,215. 

November  4. 
Accepted  Lever  Bros',  draft  at  20  days'  sight  $428. 

November  5. 
B.  B.  Pierce  &  Co.  draw  on  us  at  60  days'  sight  for  $2,200.    We  paid  it  at  once  less  discount  for  60  days. 

November  6. 
Bought  draft  for  $122.50  at  J/2%  exchange  and  remitted  it  to  Saxon  &  Company  in  full. 

November  7. 
Sold  to  Soames  &  Phipps  at  2/10  N/30  Mdse.  $258.70. 

[36] 


November  8. 
Paid  our  acceptance  of  October  23  favor  Milton  &  Co.  $350. 

November  9. 
Gave  Park  &  Til  ford  check  in  full  less  discount  3%.  - 

November  12. 
Accepted  B.  B.  Pierce  &  Company's  draft  favor  of  J.  W.  Edmunds  dated  November  8  at  30  days'  sight 
in  full  $824.62. 

November  13. 

Bought  of  Tomasso  DeVito  Mdse.  $3,250.,  terms  4/15  N/30. 

November  14. 
Received  cash  from  Brimmer  and  Goldberg  for  their  acceptance  of  October  15,  $142.80. 

November  17. 
Received  of  Soames  &  Phipps  cash  for  bill  of  November  7  less  discount  2%. 

Drew  on  Holden  &  Bliss  at  30  days'  sight  for  $1,640.25  favor  of  ourselves,  accepted  14th  inst.    Discounted 
the  draft  at  National  Security  Bank  this  day. 

November  18. 
Received  of  Nelson  &  Stern  cash  for  bill  of  November  3,  less  discount  2%. 

Accepted,  payable  at  National  Shawmut  Bank,  Lever  Bros,  draft  for  $250.80  at  20  days'  sight,  favor  of 
themselves. 

Sold  John  B.  Wise  Mdse.  $425.80,  terms  2/10  N/30. 

November  19. 
Received  of  Ellison  &  Co.  on  account  an  accepted  draft  for  $525  at  30  days  drawn  by  the  Bowery  Bank  of 
New  York  on  the  Fourth  National  Bank  of  Boston,  in  his  favor  and  endorsed  by  him  to  Cole  &  Locke. 

November  20. 
Bought  of  B.  B.  Pierce  &  Co.  Mdse.  $1,066.50.    Gave  them  in  part  payment  the  acceptance  received  from 
Ellison  &  Co.  on  the  19th  inst. 

November  21. 
Mr.  Locke  paid  his  note  of  November  1  in  cash  with  interest  at  6%. 

November  22. 
Sold  C.  A.  Weed  at  10  days  Mdse.  $420.81. 

November  23. 
Paid  T.  DeVito  for  bill  of  November  13  less  discount  4%. 
Prepaid  our  acceptance  of  the  12th  inst.,  favor  J.  W.  Edmunds  less  discount  for  19  days. 

November  24. 
Paid  our  acceptance  Lever  Bros',  draft  of  November  4. 

November  28. 
Received  cash  of  J.  B.  Wise  for  bill  of  November  18,  less  discount  2%. 

November  29. 
Charles  T.  Johnson  fails  and  pays  40%.     Received  cash  from  the  assignees  in  full  settlement. 

November  30. 

Discounted  at  National  Shawmut  Bank  Acme  Fruit  Company's  note  received  from  S.  O.  Locke  November 
1.    Discount  6%. 

November  30. 

Messrs.  Cole  and  Locke  each  withdrew  cash  $100  which  is  to  be  considered  their  salary  as  managers  of  the 
concern. 

[37] 


EXERCISE  NO.  110 
J.  C.  Edison 

Trial  Balance  December  31,  1918 

Cash $2,545.00 

Accounts  Receivable 10,163.75 

Notes   Receivable    2,749.00 

Inventory,  June  30,  1918 6,758.70 

Office  Equipment    680.00 

Accounts  Payable  $2,198.50 

Notes  Payable  2,041.00 

J.  C.  Edison,  Capital 21,830.00 

Purchases  (no  returns)  24,560.00 

Interest  on   Notes  Receivable 123.40 

Interest  on  Notes  Payable 198.40 

General  Administrative  Expenses 2,168.25 

Selling  Expense   4,690.00 

Sales    29,840.20 

Rent    600.00 

Cash  Discounts  on  Sales 285.00 

Cash  Discounts  on  Purchases 195.00 

Sales  Returns  and  Allowances 830.00 

$56,228.10      $56,228.10 

Inventory,  December  31,  1918 $9,200.00 

The  Notes  Receivable  balance  consists  of  two  notes:  one  for  $2,000,  dated  November  15,  1918,  at  3  months, 
bears  7%  interest  and  one  for  $749,  dated  November  1,  1918,  at  4  months  which  bears  Ay2%  interest. 

The  Notes  Payable  balance  consists  of  two  notes:  one  for  $1,541,  dated  October  28,  1918,  at  6  months, 
interest  at  4^%,  and  one  for  $500  dated  December  1,  1918,  at  two  months. 

Depreciation  on  office  equipment  10%  per  annum.  » 

Reserve  1^%  of  the  balance  due  from  trade  debtors  to  cover  the  amount  which  is  estimated  will  be  de- 
ducted by  customers  when  paying  the  balances  they  owe  as  of  December  31,  1918. 

Required: 

(a)  Working  sheet  with  four  additional  columns  for  Adjustments  and  Adjusted  Trial  Balance. 

(b)  Adjusting  and  closing  entries. 

Comments: 

Mr.  Edison's  drawings  have  been  charged  to  General  Administrative  Expenses. 

All  disbursements  for  freight  and  hauling  inward  have  been  charged  to  Purchases. 

The  goods  on  hand  at  the  beginning  and  end  of  the  period  under  review  were  valued  at  invoice  prices. 


[38] 


EXERCISE  NO.  Ill 
Samuel  Goldman 

Trial  Balance,  December  31,  1918 

Furniture  and  Fixtures $1,200.00 

Cash   875.00 

Notes  Receivable 250.00 

Accounts  Receivable 8,890.00 

Inventory,  December  31,  1917 5,678.90 

Mortgage  Payable  (On  Furniture  and  Fixtures) $500.00 

Accounts  Payable 1,890.60 

Notes  Payable  720.50 

Samuel  Goldman,  Capital 8,100.00 

Purchases   : 9,021.00 

Purchase  Returns  189.65 

Purchase  Discount   208.42 

Freight  Inward  367.90 

Sales  17,852.04 

Sale  Returns 260.41 

Selling  Expense   1,860.00 

General  Administrative  Expense 1,028.00 

Interest   30.00 

$29,461.21      $29,461.21 
Inventory  December  31,  1918 $4,145.29 


Required: 

(a)  Working  sheet. 

(b)  Balance  sheet  (fixed  assets  first). 

(c)  Closing  entries. 

(d)  Answer  questions. 

The  mortgage  payable  is  a  fixed  liability. 

Mr.  Goldman  wishes  you  to  credit  his  Capital  account  for  net  profit  sufficient  to  increase  his  investment  to 
$10,000,  the  balance  of  the  net  profit  to  be  credited  to  an  account  entitled  "Samuel  Goldman,  Current." 

1.  Does  the  amount  of  accounts  receivable  as  compared  with  the  sales  indicate  that  collections  were  slow 
or  normal? 

2.  Give  percentage  of  cost  of  doing  business  (operating  expenses  plus  other  charges  minus  other  income) 
to  net  sales. 

3.  Give  percentage  of  gross  profit  on  sales  to  sales. 

4.  Has  Mr.  Goldman  withdrawn  anything  from  the  business  for  personal  use?    If  so,  to  what  account 
was  it  charged? 


[39] 


EXERCISE  112 
A.  C.  Walker 

Trial  Balance  September  30,  1918  (before  adjusting) 

Office  Equipment   $950.00 

Store  Equipment 3,200.00 

Cash 2,125.92 

Accounts  Receivable 20,080.55 

Merchandise  Inventory  March  31,  1918 18,441.62 

Accounts  Payable  $6,498.58 

A.  C.  Walker,  Capital 40,000.00 

A.  C.  Walker,  Drawing 1,500.00 

Purchases   102,580.91 

Purchase  Returns   1,719.67 

Sales 148,471.18 

Sale  Returns 12,180.60 

Selling  Expense  32,210.50 

Administrative  Expense 2,165.24 

Express 1,254.09 

$196,689.43    $196,689.43 
Merchandise  on  hand  September  30,  1918 $19,250.33 

1  and  2.  The  business  has  been  in  operation  one  year  and  instead  of  setting  up  reserve  accounts  the 
bookkeeper  credited  office  equipment  $50  and  store  equipment  $168  at  the  time  the  books  were  closed 
(March  31,  1918).  It  is  now  desired  to  open  reserve  accounts  and  to  adjust  the  balances  of  the  equipment 
accounts  to  show  cost. 

3  and  4.  Add  to  the  reserve  accounts  5%  of  the  cost  of  equipment  to  cover  depreciation  for  the  current 
period. 

5.  It  is  estimated  that  $500  of  the  accounts  receivable  are  uncollectable. 

6.  Mr.  Walker  wishes  his  drawings  charged  to  administrative  expense  and  the  drawing  account  closed. 

7.  The  inward  express  charges  amount  to  $313.52.    Transfer  this  amount  to  purchases. 

Required: 

(a)  Working  sheet  (10  columns). 

(b)  Adjusting  and  closing  entries. 

(c)  Profit  and  loss  statement. 

(d)  Why  is  not  this  business  more  prosperous? 

Examine  the  two  statements  and  find  reason. 


[40] 


EXERCISE  NO.  113 

1.  November  13,  1917,  you  have  three  bills  on  which  you  are  entitled  to  discount  if  paid  at  once — one 
for  $1,375.50,  3%,  another  for  $647.35,  2%,  and  a  third  for  $1,733.65,  V/2%.  You  have  a  note  on  hand  for 
$4,175  at  60  days  dated  November  1,  1917,  which  you  have  discounted  and  with  the  proceeds  pay  the  bills 
less  the  discount.    How  much  did  you  save  by  the  operation?  (Value  20) 

2.  If  the  note  in  question  No.  1  had  been  payable  with  interest  at  6%  what  would  have  been 

(a)  The  net  proceeds  of  the  note,  and 

(b)  The  amount  of  cash  left  after  paying  the  bills  and  taking  advantage  of  the  discount?  (Value  10 

3.  A  check  for  $238.08  is  remitted  to  pay  a  bill  on  which  there  is  a  discount  of  4%.  What  was  the  amount 
of  the  bill?  (Value  5) 

4.  You  purchase  goods  amounting  to  $500  on  60  days'  credit  and  can  secure  a  discount  of  2%  by  paying 
the  bill  at  once.  You  borrow  the  money  from  a  bank  by  having  your  note  at  60  days  discounted  and  with 
the  net  proceeds  you  pay  the  bill.     How  much  did  you  borrow  and  what  was  the  amount  of  the  note?    . 

(Value  10) 

5.  On  closing  your  books  December  31,  1917,  you  have  on  hand  three  interest-bearing  notes  as  follows: 

$2,025,  at  3  months,  dated  December  1,  1917,  at  5%. 
$10,250,  at  2  months,  dated  December  15,  1917,  at  4y2%. 
$3,410,  at  30  days,  dated  December  10,  1917,  at  6%. 
Compute  interest  accrued  at  date  of  closing  and  make  journal  entry  therefor.  (Value  10) 

6.  The  bank  discounts  your  note  for  $1,540.60,  date  January  7,  1918,  at  60  days,  bearing  interest  at  6% 
and  discounted  January  9. 

(a)  What  amount  is  due  at  maturity? 

(b)  What  is  the  discount  time? 

(c)  What  is  the  discount? 

(d)  What  sum  is  realized  upon  the  note?  (Value  10) 

7.  J.  T.  Connell  gave  you  a  note  for  $1,175.90  dated  February  10  at  2  months  which  you  had  discounted 
February  11. 

(a)  What  amount  is  due  at  maturity? 

(b)  What  is  the  discount  time? 

(c)  What  is  the  discount? 

(d)  What  sum  is  realized  upon  the  note?  (Value  10) 

8.  A.  W.  Blake  gives  you  a  note  at  90  days  for  $287.50,  dated  November  1,  which  you  had  discounted 
November  2.     Make  journal  entry  for  the  note  discounted.  (Value  10) 

9.  Problem  No.  35  from  the  Massachusetts  C.  P.  A.  Examination  in  Practical  Accounting  October  13, 
1916. 

The  net  profit  of  a  business  May  1,  1914,  $8,905.82;  Inventory  December,  1911,  $3,137.24;  Purchases 
$110,831.64;  Sales  $163,376.08;  Factory  Labor  $38,999.16;  Factory  Expenses  $6,403.94;  Repairs  $32.00; 
Telephone  $832.12;  Insurance  $392.46;  Advertising  $28.00;  Commissions  Paid  $1,922.02;  Interest  Paid 
$626.00;  Legal  Expenses  $35.00;  drawn  out  by  proprietor  $3496.00. 

From  the  foregoing  information  ascertain  Merchandise  Inventory  on  May  1,  1914.  (Value  15) 


[41] 


EXERCISE  NO,  114 

George  W.  Moody's  Trial  Balance  September  30,  1918  (Before  Adjusting) 

Real  Estate   $25,000.00 

Store  Fixtures 4,250.00 

Reserve  for  Store  Fixtures $600.00 

Motor  Truck  2,850.00 

Reserve  for  Motor  Truck 412.50 

Office  Equipment  1,850.00 

Reserve  for  Office  Equipment 140.00 

Cash 2,200.48 

Accounts  Receivable 27,266.49 

Notes  Receivable 325.00 

Merchandise  Inventory,  March  31,  1918 12,428.50 

Mortgage  Payable 10,000.00 

Accounts  Payable  17,920.80 

G.  W.  Moody,  Capital 43,000.00 

G.  W.  Moody,  Personal 600.00 

Sales    48,103.48 

Sale  Returns    1,740.60 

Purchases   .' 33,460.20 

Purchase  Returns   2,450.10 

Freight  In    385.90 

Selling  Expense   6,363.54 

General  Administrative  Expense 2,840.00 

Discounts  on  Purchases 1,338.40 

Delivery  Expense   818.00 

Discounts  on  Sales 969.44 

Insurance  Unexpired   35.60 

Garage  Supplies    122.20 

Rent  Expense  550.00 

Rent  Income   550.00 

Maintenance  of  Real  Estate 459.33 

$124,515.28    $124,515.28 
Merchandise  Inventory,  September  30,  1918 $14,260.28 

Required: 

(a)  Working  sheet. 

(b)  Make  journal  entries  to  place  the  following  adjustments  on  the  books: 

1.  The  building  included  in  the  Real  Estate  account  cost  $20,000  and  was  finished  and  occupied  August 
1,  1918.    Compute  depreciation  at  the  rate  of  two  per  cent  per  annum. 

2.  Estimated  depreciation  of  motor  truck  for  this  year  25%. 

3.  Estimated  depreciation  of  office  equipment  10%  per  annum. 

4.  Estimated  depreciation  of  store  fixtures  10%  per  annum. 

5.  An  I  O  U  for  $50,  which  has  been  carried  as  cash  for  the  past  two  months  is  considered  worthless. 

6.  Close  Garage  Supplies  into  Delivery  Expense. 

7.  It  is  estimated  that  the  motor  truck  has  been  used  to  haul  goods  from  the  freight  depot  to  the  store 
about  one  quarter  of  the  time  (Debit  "Hauling  Inward"). 

8.  The  Mortgage  Payable  is  dated  August  1,  1918,  interest  payable  semi-annually  at  6%.     Place  on  the 
books  the  interest  accrued. 

[42] 


9.  Close  Maintenance  of  Real  Estate  into  Rent  Income. 

10.  Distribute  the  rent  expense  25%  to  General  Administrative  Expense  and  75%  to  Selling  Expense. 

11.  Provide  for  loss  on  uncollectable  accounts  by  reserving  an  amount  equal  to  one  quarter  of  1%  of 
the  net  sales  as  of  September  30. 

Some  of  the  above  adjustments  are  permanent,  while  others  may  be  reversed  at  the  beginning  of  the  new 
period.     Designate,  by  checking,  the  adjusting  entries  that  may  be  reversed. 

Comments: 

Observe  that  although  Mr.  Moody  owns  the  building  in  which  he  does  business,  he  charges  Rent  Expense 
and  credits  Rent  Income  for  a  fair  rental.  This  procedure  does  not  affect  the  net  profit  but  it  increases  the 
operating  expenses  to  cover  the  use  of  the  building. 


[431 


EXERCISE  NO.  115 
PARTNERSHIP  PROBLEMS 

No.  1.  A,  B,  and  C  are  partners  under  an  agreement  to  invest  $20,000  each.  Excess  contributions  are  to 
draw  interest  and  deficits  are  to  be  charged  interest  at  6%.    A  invests  $15,000;  B,  $20,000;  and  C,  $25,000. 

It  is  also  agreed  that  all  drawings  in  excess  of  salary  shall  be  charged  interest  at  6%.  The  drawings  in 
excess  of  salary  were  as  follows : 


A— $300 

March  29, 

1917 

300 

Oct.   20, 

1917 

100 

Dec.   31, 

1917 

B— $150 

April   1, 

1917 

300 

July   10, 

1917 

100 

Dec.   10, 

1917 

The  books  are  closed  December  31,  1917,  business  period  one  year.    Compute  interest  due  to  or  from  each 
partner.     (Actual  number  of  days,  30  days  to  a  month,  decimal  method.) 


No.  2. 


A — Capital 


B — Capital 


Jan.    1,  $18,000 


Jan.    1,  $16,000 


A — Personal 
Feb.     1,  $175        Jan.l,  $100 
April    1,     100 
June     1,    200 

B — Personal 
Mar.     1,  $160 
May     1,     150 
June     1,     100 


The  above  accounts  show  the  investments  and  drawings  of  A  and  B.  The  net  profit  $6,800  is  to  be 
divided  according  to  the  average  investment.  Books  closed  June  30.  Make  journal  entries  disposing  of  the 
net  profit  between  the  partners.     (Kester,  page  281.) 

No.  3.  The  firm  of  Atwood  and  Smith  enter  into  an  agreement  with  Robert  Brewer  whereby  Mr.  Brewer 
is  to  acquire  by  purchase  one-half  of  the  business  for  $150,000.  Mr.  Brewer  has  turned  over  650  shares  of 
the  Northeastern  R.  R.  stock  now  selling  at  $92  per  share  and  pays  the  balance  of  the  $150,000  in  cash. 
The  agreement  provides  that  the  assets  and  liabilities  of  Atwood  and  Smith  are  to  be  taken  over  at  their  book 
value  and  that  the  good  will  of  the  business  is  valued  at  $40,000.  Atwood's  net  investment  is  $70,000  and 
Smith's  net  investment  is  $40,000.  According  to  the  original  agreement,  the  profits  or  losses  are  to  be  shared 
in  the  proportion  of  five-eighths  to  Atwood  and  three-eighths  to  Smith. 

Make  journal  entry  or  entries  to  bring  on  to  the  books  the  railroad  stock,  cash,  good  will  and  capital 
account  of  the  new  partner. 

No.  4.  January  1,  1918,  Messrs.  Haines  and  Ditson  have  agreed  to  sell  one-third  of  their  business  to  Paul 
M.  Foss.  Foss  has  turned  over  to  Haines  and  Ditson  a  note  for  $40,000  made  by  the  Thorp  Mfg.  Co.  in  his 
favor,  dated  December  21  at  three  months  and  bearing  interest  at  seven  per  cent ;  also  a  note  made  by 
Hayden  &  Morse  payable  to  Foss  for  $20,000,  dated  January  1,  1918  and  payable  in  60  days.  Foss  is  to  re- 
ceive credit  for  the  accrued  interest  and  pays  the  balance  in  cash  $10,000.  According  to  a  balance  sheet 
dated  December  31,  1917,  Haines  net  investment  was  $60,171.10  and  Ditson's  was  $60,000. 

Make  Journal  entry  or  entries  to  place  the  good  will  on  the  books  and  to  open  Foss'  Capital  account.  Credit 
Foss  for  the  accrued  interest.    Haines  and  Ditson  share  equally  in  the  gains  or  losses. 


[44] 


EXERCISE  NO.  116 
PARTNERSHIP  PROBLEMS 
Write  the  answer  to  each  question  distinctly  and  separated  from  the  work. 

1.  "When  interest  is  not  allowed  on  partners'  capital  the  investments  being  equal  and  the  profits  shared 
unequally,  that  partner  loses  who  is  entitled  to  the  smaller  share  of  the  profits." 

Prove  the  above  statement  by  (a)  showing  accounts  with  the  partners  when  interest  is  not  allowed  and  (b) 
showing  the  partners'  accounts  when  interest  is  allowed  at  6% ;  also  indicate  which  partner  has  lost  and  how 
much.    Use  the  following  figures  in  your  demonstration: 

A  and  B  invest  $20,000  each.  The  business  period  is  one  year.  Without  allowing  interest  the  net  profit  is 
$9,000,  2/3  of  which  goes  to  A  and  1/3  to  B. 

2.  In  the  same  manner  as  in  No.  1  demonstrate  that  when  interest  is  not  allowed,  the  partners'  investments 
being  unequal  and  profits  shared  equally,  that  partner  loses  who  has  the  larger  investment. 

A's  investment  $25,000. 

B's  investment  $15,000. 

Profits  shared  equally. 

Net  profit  without  allowing  interest  $9,000. 

3.  It  follows  that  when  interest  is  not  allowed  the  only  circumstances  under  which  neither  partner  would 
lose  would  be  in  the  case  of  profits  being  shared  in  proportion  to  investments  with  proportionate  drawings 
made  at  the  same  time.    Demonstrate  the  above  statement  using  the  following  information : 

A's  investment  $12,000.00. 

B's  investment  $8,000.00. 

A  draws  $600  and  B  draws  $400,  on  the  same  date,  six  months  before  the  closing  of  the  books. 

Net  profit  $3,000  (without  interest)  to  be  shared  in  the  same  proportion  as  their  investments. 

Show  partners'  accounts  both  with  and  without  interest. 


4. 


C — Capital 


C — Personal 


Dr. 


D — Capital 


Dr. 
Apr.  1,  $2,000 


Cr. 

Dr. 

Jan.  1,  $25,000 

Feb.  28, 

$250 

Mar.  1,   3,000 

Mar.  31, 

150 

May  31, 

200 

Cr. 

Dr. 

Jan.  1,  $26,000 

Feb.  28, 

$300 

Apr.  30, 

200 

May  31, 

100 

June  30, 

50 

Cr. 


D — Personal 


Cr. 


Business  period  six  months  ending  June  30. 

Net  profit  $7,800. 

Find  each  partner's  average  investment  (Use  month-dollars  method). 

Divide  the  net  profit  between  the  partners  according  to  the  average  investments. 

5.  January  1,  1918,  the  firm  of  Harper  and  Johnson  feeling  the  need  of  more  capital  in  their  business 
have  entered  into  an  agreement  with  H.  B.  Ballard  whereby  Mr.  Ballard  is  to  acquire  by  purchase  a  one- 
half  interest  in  the  business  for  $75,000,  his  contribution  to  constitute  one-half  of  the  capital  of  the  new 
concern.  Mr.  Ballard  has  turned  over  to  Messrs.  Harper  &  Johnson  cash  $35,000  and  four  notes  of 
$10,000  each  in  his  favor.  The  notes  bear  interest  at  7%,  are  dated  Jan.  1,  1918,  and  mature  in  2,  4,  6, 
and  8  months  respectively.  The  assets  and  liabilities  of  Messrs.  Harper  and  Johnson  are  to  be  considered 
at  their  book  figures  and  the  good  will  is  valued  at  $15,000. 

Make  entries  to  place  the  good  will,  cash,  notes,  and  Mr.  Ballard's  capital  on  the  books. 


[45] 


EXERCISE  NO.  117 

PARTNERSHIP 

No.  1.  I.  W.  Kelley  sells  one-half  of  his  business  to  Peter  Lee  for  $31,500  cash.  The  excess  of  cash  paid 
by  Lee  over  and  above  one-half  of  Kelley's  capital  is  equal  to  one-half  of  two  years'  average  profits  less 
6%  on  the  capital  invested.  On  this  basis  the  total  good  will  is  valued  by  Kelley  at  $18,000.  The  cash  re- 
ceived by  Kelley  is  not  to  form  a  part  of  the  capital  of  the  new  concern.  The  following  balance  sheet  was 
used  as  a  basis  for  negotiations: 

I.  W.  KELLEY  • 

Balance  Sheet 

Assets    $60,000    Liabilities $15,000 

Kelley's   Capital 45,000 


$60,000  $60,000 


Required: 

(a)  Journal  entry  to  bring  the  good  will  on  to  the  books. 

(b)  Kelley's  capital  account  after  good  will  is  added. 

(c)  Journal  entry  to  place  Lee's  capital  account  on  the  books. 

(d)  Balance  sheet  of  Kelley  and  Lee. 

No.  2.  Goodwin  and  Haven  agree  to  sell  a  one-third  interest  in  their  business  to  A.  C.  Gilman.  The 
good  will  is  considered  to  be  worth  a  two  years'  purchase  of  the  average  yearly  profit  of  the  years  1914,  1915, 
and  1916,  less  6%  interest  on  capital  invested. 

Net  Profit  Capital  Invested 
1914— $7,250  1914— $40,000 

1915 —  8,500  1915—  45,000 

1916—10,000  1916—  50,000 

GOODWIN  AND  HAVEN 

BALANCE  SHEET  DECEMBER  31,  1916 

Cash   $5,000    Liabilities    $20,000 

Other  Assets 65,000    Goodwin,  Capital  30,000 

Haven,  Capital  20,000 


$70,000  $70,000 


The  good  will  is  to  be  divided  between  Goodwin  and  Haven  in  the  same  proportion  as  their  investments. 
Gilman's  investment  is  to  be  added  to  the  capital  of  the  firm. 

What  is  the  investment  of  each  of  the  three  partners  after  the  transaction  is  completed  ? 

No.  3.  G.  W.  Carter  has  agreed  to  admit  F.  W.  Frisbee  as  an  equal  partner  upon  payment  of  $40,000 
which  is  to  constitute  a  part  of  the  capital  of  the  new  concern.  Mr.  Carter  has  assets  $75,000  and  liabilities 
$40,000. 

Make  journal  entries  required  for  the  deal. 

No.  4.  Assuming  that  in  the  above  problem  Carter  had  sold  one-half  of  his  business  to  Frisbee  upon  pay- 
ment of  $20,000  which  was  to  be  converted  to  his  own  use  by  Carter,  make  all  the  journal  entries  necessary 
to  bring  on  the  good  will  and  to  place  Frisbee  on  the  books  as  a  partner.  It  is  also  assumed  that  the  books 
formerly  used  by  Carter  are  to  be  used  by  the  new  firm. 

[46] 


EXERCISE  NO.  118 

No.  1.  Compute  the  inward  freight  which  is  omitted  from  the  following  information:  Net  Sales  $149,- 
290.58;  Inventory  of  March  31,  1917,  $18,441.62;  Purchases  $132,580.91;  Purchase  Returns  $1,719.67;  In- 
ventory of  September  30,  1917,  $19,250.33 ;  Gross  Profit  on  Sales  $18,924.53. 

No.  2.  It  is  desired  to  arrive  approximately  at  the  net  profit  of  a  business  without  making  a  physical 
inventory.  Assuming  that  the  gross  profit  on  sales  will  average  36%  of  the  net  sales  make  a  profit  and  loss 
statement  from  the  following  information  taken  from  the  books  June  30,  1917:  Inventory  December  31, 
1916,  $12,428.50;  Sales  $46,362.88;  Purchases  $31,010.10;  Freight  Inward  $385.90;  Hauling  Inward 
$254.58;  Selling  Expense  $6,882.29;  Discounts  on  Purchases  $1,338.40;  Interest  on  Notes  Receivable  $24; 
General  Administrative  Expense  $3,023.75 ;  Discounts  on  Sales  $964.44 ;  Delivery  Expense  $763.75 ;  In- 
terest on  Mortgage  Payable  $150;  Loss  on  Bad  Accounts  $165.91 ;  Accounts  Payable  $84,740.22. 

No.  3.  A  trial  balance  is  found  to  have  a  debit  footing  of  $17,968.57  and  a  credit  footing  of  $18,271.37. 
Upon  investigation  the  following  errors  are  disclosed : 

A  purchase  amounting  to  $521.25  has  been  debited  to  a  creditor  as  $512.25;  the  debit  side  of  an  entry 
providing  for  depreciation  of  motor  truck  $252,  has  not  been  posted ;  the  total  of  sales  returns  book  was 
footed  $5  short;  and  a  discount  allowed  to  a  customer  of  $25.40  was  posted  to  the  wrong  side  of  the  Mer- 
chandise Discount  account. 

State  exactly  how  you  would  correct  the  above  errors  on  the  books,  giving  entries  if  any ;  also  give  figures 
and  footings  of  the  corrected  trial  balance.    It  is  assumed  that  controlling  accounts  are  kept. 


[47] 


EXERCISE  NO.  119 

Trial  Balance  of  Sterling  and  Price,  June  30,  1918 

Real  Estate    $32,000.00 

Reserve  for  Depreciation  of  Buildings $960.00 

Furniture  and  Fixtures 1,520.00 

Reserve  for  Depreciation  of  Furniture  and  Fixtures 100.00 

Auto  Truck  (for  delivery)   1,500.00 

Reserve  for  Depreciation  of  Auto  Truck 150.00 

Cash    3,185.60 

Accounts  Receivable 1 1,703.10 

Notes  Receivable 750.00 

Inventory  December  31,  1917 16,995.40 

Mortgage  Payable 15,500.00 

Accounts  Payable  3,160.20 

J.  E.  Sterling,  Capital 22,000.00 

O.  E.  Price,  Capital 18,000,00 

Purchases    37,919.60 

Purchase  Returns 1,000.00 

Sales 52,533.83 

Sale  Returns 840.30 

Salaries  of  Salesmen 2,466.96 

Office  Salaries   720.00 

Store  Expense  (General) 245.90 

Management  Expense   1,400.00 

Office  Expense 115.50 

Delivery  Expense   970.00 

Real  Estate  Expense 605.00 

Cash  Discount  on  Sales 1,030.00 

Cash  Discount  on  Purchases 1,090.20 

Interest  on  Mortgage  Payable 310.00 

Loss  on  Bad  Accounts 216.87 


$114,494.23    $114,494.23 

Required: 

(a)  Ledger  accounts. 

(b)  Working  Sheet  with  10  columns:  Trial  Balance  (2),  Adjustments  (2),  Adjusted  Trial  Balance  (2), 
Profit  and  Loss  (2),  Balance  Sheet  (2). 

(c)  Profit  and  loss  statement. 

(d)  Balance  sheet. 

(e)  Adjusting  and  closing  journal  entries  with  full  explanations. 

(/)     Post  journal  entries  into  ledger  and  rule  off  accounts  that  balance. 

General  Information: 

Inventory  of  merchandise  on  hand  June  30,  1918,  $15,286.94. 

The  building  is  valued  at  $20,000.     Provide  for  depreciation  at  the  rate  of  3%  per  annum. 
The  Furniture  and  Fixtures  account  covers  the  equipment  of  both  office  and  store.     Store  equipment  is 
valued  at  $1,000  and  the  office  equipment  at  $520.     Depreciation  is  estimated  to  be  10%  per  annum. 
The  depreciation  of  the  auto  truck  for  the  current  year  is  considered  to  be  20%. 
Reserve  $100  for  estimated  loss  on  accounts  receivable  as  of  June  30,  1918. 
At  the  closing  of  the  books  four  days'  salary  is  due  to  employees.     The  salaries  of  salesmen  amount  to 

[48] 


$94.88  per  week.  Salary  of  bookkeeper,  who  is  also  the  stenographer,  is  $20  per  week.  Salary  of  chauffeur 
$18  per  week. 

The  mortgage  payable,  $15,500,  is  on  the  real  estate;  is  dated  November  1,  1917,  and  the  interest  payable 
in  equal  semi-annual  payments,  is  at  6%.  The  last  interest  was  paid  May  1,  1918.  (Compute  interest  for 
even  months.)  ', 

The  balance  of  the  Notes  Receivable  account  consists  of  one  note  dated  April  13,  1918,  at  three  months 
and  bears  interest  at  7%.    Bring  the  interest  accrued  on  to  the  books. 

Number  each  adjustment  on  the  working  sheet  by  placing  a  very  small  circle,  with  the  number  inside,  on 
the  left  of  each  amount.    Give  the  same  number  to  the  corresponding  journal  entry. 

The  partners  agree  to  divide  the  profit  or  share  the  losses  in  the  same  proportion  as  their  investments  bear 
on  the  trial  balance  of  June  30,  1918. 

Mr.  Sterling  decides  to  allow  his  investment  to  remain  unchanged  and  wishes  his  share  of  the  profits 
carried  into  a  "current"  account.  Mr.  Price  wishes  you  to  credit  $2,000  of  his  share  of  the  net  profit  to  his 
capital  account  and  the  balance,  if  any,  to  the  "current"  account. 


[49J 


EXERCISE  NO.  120 

ADJUSTING  ENTRIES 

In  the  following  adjustments  it  is  assumed  that  the  necessary  Reserve  accounts  are  already  on  the  books. 

No.  1.     A  desk  which  cost  $60  has  been  sold  for  $10.  (Value  5) 

No.  2.     Salesroom  equipment  to  the  amount  of  $482  has  been  worn  out  or  discarded  during  the  past  year. 

(Value  5) 

No.  3.  A  machine  which  cost  $5,000  has  been  discarded  and  sold  for  $60.  A  new  machine  was  pur- 
chased at  a  cost  of  $3,500.  (Value  10) 

No.  4.  An  old  auto  truck  which  cost  $1,700,  and  $1,250  in  cash  were  given  for  a  new  truck  priced  at 
$1,800.  (Value  15) 

No.  5.  A  concern  needing  a  larger  safe  purchased  one  for  $400  and  the  old  safe  which  cost  $200  was 
sold  for  $50.  The  bookkeeper  debited  Purchases  and  credited  Cash  for  the  new  safe,  and  debited  cash  and 
credited  Expenses  for  the  amount  received  for  the  old  safe.  Make  entries  to  correct  the  errors  and  to  place 
the  transactions  properly  on  the  books.  (Value  15). 

No.  6.  An  examination  of  a  set  of  books  disclosed  the  following :  New  office  equipment  costing  $675  was 
debited  to  Office  Expense ;  a  new  wagon  costing  $250  was  debited  to  Delivery  Expense  and  Office  Furniture 
costing  $72  became  useless  and  was  charged  to  Profit  and   Loss   at   $72.     Make   entires   to    correct   errors. 

(Value  15) 

No.  7.  It  is  decided  to  sell  the  delivery  equipment  which  cost  $4,560,  and  to  hire  the  service  hereafter. 
On  April  30,  1918,  the  outfit  was  sold  for  $2,850  cash.  The  books  were  closed  December  31,  1917,  when 
10%  of  the  cost  was  added  to  the  Reserve  for  Depreciation  account  making  the  available  reserve  $4,000. 
Make  entries  providing  for  the  depreciation,  four  months,  since  the  books  were  closed  and  to  close  the 
reserve  and  equipment  accounts.     Business  period  one  year.  (Value  20) 

No.  8.  The  Reserve  for  Discount  account  has  a  credit  balance  of  $1,500  which  is  considered  too  large 
and  at  the  end  of  the  period  instead  of  adding  to  the  reserve  it  is  decided  to  reduce  it  to  $500.        (Value  5) 

No.  9.  An  ell  was  added  to  a  business  building.  The  bookkeeper  charged  the  cost  $3,500  to  Building 
Repairs.    Correct  the  error.  (Value  5) 

No.  10.  An  explosion  shattered  the  window  glass  in  a  portion  of  a  building.  The  bookkeeper  charged 
the  cost,  $500,  to  the  building.    Correct  error.  (Value  5) 


50  J 


EXERCISE  NO.  121 

Evert  and  Williams 

Trial  Balance,  June  30,  1919,  Before  Adjusting  Entries  Are  Made 

Cash $5,240.05 

Accounts  Receivable  1 16,935.00 

Notes  Receivable 1,844.00 

Mdse.  on  hand,  December  31,   1918 114,862.24 

Land 20,625.00 

Buildings 24,000.00 

Office  Equipment 3,954.75 

Delivery  Equipment 2,681.20 

Accounts  Payable $111,625.87 

Notes  Payable   60,000.00 

J.  T.  Evert,  Capital 100,000.00 

J.  T.  Evert,  Drawing  Account 1,300.00 

W.  B.  Williams,  Capital 50,000.00 

W.  B.  Williams,  Drawing  Account 1,280.00 

Sales 696,219.28 

Sales  Returns  and  Allowances 2,100.00 

Purchases    620,213.30 

Purchase  Returns  and  Allowances 124.90 

General  Administrative  Expense  23,572.25 

Selling  Expense 67,564.12 

Delivery  Expense   2,098.00 

Cash  Discount  on  Sales 1 1,459.26 

Cash  Discount  on  Purchases 2,589.63 

Interest    830.51 

$1,020,559.68  $1,020,559.68 

Merchandise  Inventory,  June  30,  1919 $162,864.51 

Depreciation  of  Buildings,  2%  per  annum. 
Depreciation  of  Office  Equipment,  10%  per  annum. 
Depreciation  of  Stable  Equipment,  10%  per  annum. 
Charge  30%  of  delivery  expense  to  Hauling  Inward. 

DRAWINGS  IN  EXCESS  OF  SALARY 

J.  T.  Evert  W.  B.  Williams 

$200 

$180 
425 

350 
360 

258 
315 

492 

Interest  at  5%  is  to  be  allowed  on  investments  of  partners,  (debit  "Interest  on  Capital"  for  even  months) 
and  interest  at  6%  is  to  be  charged  on  drawings  from  date  of  withdrawal  to  June  30,  1919.  Compute  the 
actual  number  of  days  between  those  dates,  divide  the  result  by  30  to  reduce  to  months  and  days  and  figure 
interest  by  "Decimal  Method."     (Credit  "Interest  on  Drawings.") 

No  postings  have  been  made  to  the  capital  accounts  during  the  current  period. 

[51] 


Date 

January 

1,  1919 

February 

3 

March 

5 

April 

28 

May 

10 

June 

3 

June 

20 

June 

21 

It  is  agreed  between  the  partners  that  their  respective  investments  shall  remain  unchanged  and  that  items 
relating  to  interest  on  drawings  and  capital,  as  well  as  the  division  of  profit  or  loss,  shall  be  posted  to  their 
respective  drawing  accounts. 

After  the  interest  on  drawings  and  capital  has  been  adjusted  the  profit  or  loss  is  to  be  divided  between  the 
partners  as  follows : 

J.    T.    Evert — two-thirds 
W.  B.  Williams — one-third 

Set  up  suitable  accounts  for  depreciation  reserves.  Reserve  ^2  of  1%  of  Net  Sales  to  provide  for  loss  on 
uncollectable  accounts. 

Both  Evert  and  Williams  have  drawn  a  salary  each  month  which  has  been  charged  to  general  adminis- 
trative expense.    The  excess  of  drawings  over  salary  allowed  has  been  charged  to  their  drawing  accounts. 

Use  "Trading  Account"  in  closing  entries. 

Required: 

(a)  Read  and  understand  every  word  on  the  problem  sheets  before  beginning  the  work. 

(b)  Transfer  balances  from  trial  balance  to  ledger  accounts  on  ledger  paper  not  more  than  five  accounts 
to  a  page.    In  the  ledger  use  the  letters  T.  B.  as  a  post-mark  for  such  balances. 

(c)  Working  sheet,  ten  columns,  with  adjustments  numbered. 

(d)  Profit  and  loss  statement. 

(e)  Balance  sheet. 

(/)  Adjusting  and  closing  journal  entries  with  full  explanations  using  "Trading  Account"  in  closing  en- 
tries. 

(g)  Post  adjusting  and  closing  entries  into  the  ledger  in  regular  form,  no  detail  omitted,  and  rule  off  the 
accounts  that  balance. 


[52] 


TEST  ON  FUNCTIONS  OF  ACCOUNTS 
Arrange  functions  of  accounts  after  the  following  form : 

Salaries  and  Wages  Accrued 


Credit : 

At  the  end  of  each  period,  etc.,  etc. 


Debit : 

At  the  beginning  of  each  period,  etc.,  etc. 

The  balance  of  the  account  represents  wages  and  salaries  accrued  but  not  paid  and 
should  be  shown  as  a  current  liability  on  the  Balance  Sheet. 

Give  functions  of  the  following  accounts,  using  the  method  to  which  you  have  been  accustomed : 

1.  Reserve  for  Depreciation  of  Stable  Equipment.  6.  Partners'  Capital. 

2.  Office  Supplies  on  Hand.  7.  Partners'  Drawings. 

3.  Taxes  Prepaid.  8.  Sales. 

4.  Accounts  Payable.  9.  Purchases. 

5.  Interest  Accrued  on  Mortgages  Payable.  10.  Partners'  Salary. 

FINAL  EXAMINATION  IN  PRACTICAL  ACCOUNTING 
Arey  and  Walters 

Trial  Balance  June  30,  1917  (Before  Adjusting) 

Cash $2,145.69 

Accounts   Receivable    15,478.91 

Reserve  for  Loss  on  Bad  Accounts $250.00 

Notes  Receivable 2,450.00 

Merchandise  Inventory  December  31,  1916  (Cost) 20,480.90 

Office  Equipment 750.00 

Store  Equipment  1,580.00 

Accounts  Payable   , 3,365.00 

Notes  Payable  940.00 

L.  P.  Arey,  Capital  16,000.00 

L.  P.  Arey,  Salary 350.00 

J.  P.  Walters,  Capital 14,000.00 

J.  P.  Walters,  Salary  600.00 

Purchases    71,280.75 

Sales 100,490.11 

Purchase  Returns   660.00 

Sale  Returns 1,640.00 

Salaries  of  Salesmen  8,000.00 

Advertising 2,000.00 

Traveling  Expenses 2,300.00 

Delivery  Expense   850.00 

Postage  for  Selling  Department 175.50 

Taxes  on  Stock 82.50 

Insurance  on  Stock 200.00 

Insurance  on  Store  Equipment 20.00 

Rent  of  Store 3,000.00 

Office  Salaries  1,400.00 

Office  Supplies 156.40 

General  Office  Expense  56.90 

Management 1,500.00 

[53] 


Telephone  and  Telegraph   79.50 

Janitor 450.00 

Discount  on  Sales 1,728.90 

Discount  on  Purchases 1,150.84 

$137,805.95    $137,805.95 
Merchandise  Inventory  June  30,  1917 $22,645.91 

1.  Adjust  the  reserve  for  loss  on  bad  accounts  to  agree  with  x/2  of  one  per  cent  of  the  net  sales. 

2.  Accrue  interest  on  note  receivable  of  $2,480  at  5%,  dated  May  16,  1917. 

3.  The  store  and  office  equipments  have  been  used  only  six  months.  Set  up  a  Reserve  for  Depreciation 
account  for  each,  assuming  that  the  equipment  will  last  ten  years. 

4.  It  is  estimated  that  one-quarter  of  the  advertising  is  practically  in  advance  and  applies  to  the  coming 
period. 

5.  Calculate  the  amount  of  accrued  taxes  on  the  basis  of  last  year's  rate  of  $16.50  per  thousand  on  $20,000. 
It  is  also  agreed  that  the  net  gain  or  loss  shall  be  divided  between  the  partners  in  the  same  proportion  as 

their  investments  as  shown  on  the  trial  balance  of  June  30,  1917. 

Required: 

(a)  Profit  and  loss  statement. 

(b)  Balance  sheet. 

(c)  Adjusting  entries. 

(d)  Closing  entries  (using  "Trading"  account). 

FINAL  EXAMINATION  IN  THEORY  OF  ACCOUNTS 

Answer  questions  1,  2,  3,  4,  and  5.  Answer  any  five  of  the  remaining  questions.  Only  the  first  ten  answers 
will  be  graded. 

1.  At  the  beginning  of  a  fiscal  year  (business  period)  the  firm  of  Brown  and  Bentley  decide  to  sell  their 
delivery  equipment  and  to  hire  the  service.  The  equipment  which  cost  $8,000  and  on  which  there  is  a 
reserve  for  depreciation  of  $6,000,  was  sold  for  $3,000.  Make  journal  entries  for  the  transaction  and  to 
close  out  the  reserve. 

2.  Find  rate  of  turnover  and  the  per  cent  of  gross  profit  on  sales  to  net  sales  from  the  following  infor- 
mation : 

Operating  Expenses    $8,920                Inventory  January  1,  1917 $6,480 

Sales  48,000                Inventory  December  31,1917 5,240 

Accounts  Receivable 26,000                Accounts  Payable 16,000 

Purchases 25,000                Freight  Outward 480 

Real  Estate 8,000               Sale  Returns 3,400 

Purchase  Returns 1,000                Notes  Receivable 2,000 

Freight  Inward 1,345 

3.  You  have  discounted  Casey  and  Sheldon's  note  for  $2,000  at  your  bank.  Give  journal  form  of  entries 
which  should  be  made  in  case  the  note  is  not  paid  by  the  maker  at  maturity. 

4.  If  a  business  does  not  provide  for  depreciation  of  equipment  what  would  be  the  effect  on  the  net  profit 
and  net  capital  ?    Explain  fully. 

5.  If  "Office  Supplies  on  Hand"  on  the  balance  sheet  is  increased  in  amount,  what  account  on  the  profit 
and  loss  statement  is  directly  affected  and  how  ?  (To  say  that  it  will  increase  or  diminish  the  net  profit  or 
loss  will  not  be  considered  an  adequate  answer.) 

6.  What  should  be  done  to  ascertain  whether  or  not  closing  journal  entries  have  been  provided  to  close 
all  accounts  that  should  be  closed  ? 

7.  Give  two  reasons  for  decrease  in  value  of  equipment. 

8.  Is  interest  accrued  on  notes  receivable  an  asset?    Why? 

[54] 


9.  When  a  business  is  sold  for  more  than  the  value  of  the  net  assets  how  is  the  good  will  divided  between 
the  partners? 

10.  What  is  a  controlling  account  and  what  are  the  advantages  of  its  use? 

11.  Should  a  partner's  salary  be  charged  to  an  expense  account?    Why? 

12.  Make  a  statement  to  account  for  the  difference  existing  between  your  check  book  balance  and  the  bal- 
ance as  per  the  statement  rendered  to  you  by  the  bank. 

FINAL  EXAMINATION  IN  THEORY  OF  ACCOUNTS 

1.  What  is  the  effect  on  the  Profit  and  Loss  Statement,  if  any,  caused  by  the  following  conditions? 

(a)  An  increase  of  assets. 

(b)  An  increase  of  liabilities. 

(c)  A  decrease  of  assets.  ; 
(rf)  A  decrease  of  liabilities. 

(e)     Delivery  equipment  purchased  for  cash. 

2.  What  is  an  "Imprest  Fund"  and  how  is  it  operated  and  posted  ? 

3.  What  is  a  "Deferred  Charge  to  Profit  and  Loss"?  State  whether  it  belongs  on  the  balance  sheet  of 
profit  and  loss  statement.    Give  two  examples. 

4.  A's  capital,  January  1,  was  $10,000.  On  the  following  December  31  his  balance  sheet  showed  a  net 
profit  of  $3,000  which  he  has  not  withdrawn  and  he  sold  out  to  B  for  $15,000.  (A)  Give  entry  placing  good 
will  on  A's  books.     (B)  Would  B  in  opening  his  books  treat  it  as  an  asset  or  as  a  liability? 

5.  A  customer  gives  you  a  note  for  $1,000  dated  June  1,  due  in  6  months  and  bearing  interest  at  6%. 
On  July  10  you  get  the  note  discounted  at  your  bank,  discount  rate  6%.  Give  cash  book  entries  for  dis- 
counting the  note,  assuming  you  are  keeping  a  four-column  cash  book. 

6.  Assuming  that  you  use  a  "Notes  Receivable  Discounted"  account,  make  the  entry  that  would  be  re- 
quired when  the  bank  notified  you  that  the  note  mentioned  in  question  No.  5  was  paid  by  the  maker  at 
maturity. 

7.  You  sell  real  estate  for  $16,000  which  cost  $13,000.  $5,000  has  been  reserved  in  former  periods  on 
the  buildings.    Make  journal  entries  for  the  sale  of  the  real  estate  and  disposal  of  the  reserve. 

8.  If  a  concern  having  a  large  amount  of  equipment  does  not  provide  for  depreciation  and  obsolescence, 
what  would  be  the  result  ?    Explain  how  this  result  is  brought  about. 

9.  Net  Sales  $73,086.89,  inventory  January  1,  $12,149.60,  net  purchases  $52,259.82,  inventory  December 
31,  $12,248.60.    Find  rate  of  turnover  and  percentage  of  gross  profit  to  net  sales. 

10.  (a)  Equipment  costing  $4,000  was  discarded  by  a  concern  which  used  a  modern  system  of  account- 
ing. Make  journal  entry,  (b)  Several  months  after  the  above  entry  was  made  the  discarded  equipment  was 
sold  for  $820.00  and  the  clerk  debited  cash  and  credited  delivery  expense  $820.  Make  journal  entry  to  correct 
the  error. 


[55] 


EXERCISE  F  (MODEL) 

E.    P.  Mason 

Trial  Balance,  December  31,  1918 

Cash   $3,468.90 

Accounts  Receivable    6,126.70 

Merchandise  Inventory,  December  31,  1917 14,874.20 

Land  and  Buildings 8,126.40 

Furniture  and  Fixtures 592.00 

Auto  Truck   2,000.00 

Accounts  Payable   $9,849.60 

Notes  Payable  1,626.40 

E.  P.  Mason,  Capital 18,846.31 

E.  P.  Mason,  Personal 3,842.00 

Purchases   50,095.42 

Freight  Inward   1,825.00 

Purchase  Returns   1,240.00 

Sales    78,090.80 

Sale  Returns 250.60 

Delivery   Expense    2,825.80 

Selling  Expense    10,196.20 

Administrative   Expense    5,025.00 

Interest  on  Notes  Receivable 14.71 

Discount  on  Purchases 1,035.00 

Interest  on  Notes  Payable 35.60 

Discounts   on   Sales 1,249.00 

Loss  on  Bad  Accounts 170.00 

$110,702.82    $110,702.82 
Inventory  of  merchandise  on  hand  December  31,  1918    $11,218.60 

Required: 

(a)  Profit  and  loss  Statement. 

(b)  Balance  sheet. 

(c)  Closing  entries. 

Mr.  Mason  wishes  his  net  profit  credited  to  his  personal  account. 


[56] 


E.  P.  MASON 
Working  Sheet — One  Year  Ending  December  31,  1918 


Trial  Balance 
Dr.  Cr. 


Profit  and  Loss  Balance  Sheet 

Expenses        Income  Assets        Liabilities 


Cash 

$3,468.90 

$3,468.90 

Accounts  Receivable   .... 

6,126.70 

6,126.70 

Merchandise    Inventory,    De- 

cember 31,  1917 

14,874.20 

$14,874.20 

8,126.40 

8,126.40 

Furniture  and  Fixtures  .    .    . 

592.00 

592.00 

Auto  Truck 

2,000.00 

2,000.00 

Accounts  Payable 

$9,849.60 

$9,849.60 

Notes  Payable 

1,626.40 

1,626.40 

E.  P.  Mason,  Capital  .... 

18,846.31 

18,846.31 

E.  P.  Mason,  Personal    .    .    . 

3,842.00 

3,842.00 

50,095.42 

50,095.42 

Freight  Inward 

1,825.00 

1,825.00 

Purchase  Returns 

1,240.00 

$1,240.00 

78,090.80 

78,090.80 

Sale  Returns 

250.60 

250.60 

Delivery  Expense 

2,825.80 

2,825.80 

Selling  Expense 

10,196.20 

10,196.20 

Administrative  Expense     .    . 

5,025.00 

5,025.00 

Interest  on  Notes  Receivable . 

14.71 

14.71 

Discount  on  Purchases    .    .    . 

1,035.00 

1,035.00 

Interest  on  Notes  Payable.    . 

35.60 

35.60 

Discounts  on  Sales 

1,249.00 

1,249.00 

Loss  on  Bad  Accounts     .    .    . 

170.00 

170.00 

Merchandise    Inventory,    De- 

cember 31,  1918 

11,218.60 

11,218.60 

Net  Profit      

5,052.29 

5,052.29 

$110,702.82 

$110,702.82 

$91,599.11 

$91,599.11 

$35,374.60 

$35,374.60 

Exercise  F   Model  — Working  Sheet 


[57] 


E.  P.  MASON 
Balance  Sheet,  December  31,  1918 

ASSETS 

Current  Assets: 

Cash    $3,468.90 

Accounts  Receivable 6,126.70 

Merchandise  Inventory   1 1,218.60 

Total  Current  Assets 

Fixed  Assets : 

Land  and  Buildings  8,126.40 

Furniture  and  Fixtures  592.00 

Auto  Truck 2,000.00 

Total  Fixed  Assets 

Total  Assets 

LIABILITIES   AND    CAPITAL 

Current  Liabilities: 

Accounts  Payable   $9,849.60 

Notes  Payable  1,626.40 

Total  Liabilities 

Capital : 

E.  P.  Mason  Investment  December  31,  1917 $18,846.31 

Net  Profit  December  31,  1917  to  December  31,  1918 $5,052.29 

Deduct : 
Drawings  December  31,  1917  to  December  31,  1918 3,842.00  1,210.29 

Total    

Exercise  F  (Model)  Balance  Sheet. 


$20,814.20 


10,718.40 
$31,532.60 


$11,476.00 


20,056.60 
$31,532.60 


[58] 


E.  P.  MASON 
Profit  and  Loss  Statement  December  31,  1917  to  December  31,  1918 

Gross  Sales  $78,090.80 

Less: 
Returned  Sales  250.60 

Net  Sales   $77,840.20 

Deduct : 

Cost  of  Goods  Sold: 

Inventory  of  December  31,  1917 $14,874.20 

Purchases    $50,095.42 

Less: 

Returned   Purchases    1,240.00 

Net  Purchases  48,855.42 

Freight  Inward 1,825.00      $65,554.62 

Deduct : 
Inventory  of  December  31,  1918 11,218.60        54,336.02 

Gross  Profit  on  Sales $23,504.18 

Deduct : 

Operating  Expenses: 

Delivery  Expense   $2,825.80 

Selling  Expense  10,196.20 

Administrative  Expense    5,025.00        18,047.00 

Net  Profit  from  Operations $5,457.18 

Add: 

Other  Income :  y?™&- "'■''' '-' :c 

Interest  on  Notes  Receivable $14.71 

Discounts  on  Purchases 1,035.00  1,049.71 

Total  Income  $6,506.89 

Deduct : 

Other  Charges: 

Interest  on  Notes  Payable $35.60 

Discounts  on  Sales 1,249.00 

Loss  on  Bad  Accounts 170.00  1,454.60 

Net  Profit  December  31,  1917  to  December  31,  1918 $5,052.29 

Exercise  F  (Model)  Profit  and  Loss  Statement 


[59] 


CLOSING    JOURNAL    ENTRIES,    DECEMBER    31,    1918 

Sales    $250.60 

Sale  Returns 

To  transfer  sales  returned  to  Sales  account  and  to  close  the  Sale  Returns 
account. 

31 

Purchases    14,874.20 

Merchandise  Inventory   (December  31,   1918) 

To  transfer  inventory  at  beginning  of  period  to  Purchases    account    and    to 
close  the  Inventory  account. 

31 

Purchase  Returns   1,240.00 

Purchases    

To  transfer  the  purchases  returned  to  Purchases  account  and  to  close  the  Pur- 
chase Returns  account. 

31 

Purchases   1,825.00 

Freight  Inward  

To  transfer  sales  returned  to  Sales  account  and  to  close  the  Sale  Returns 
Inward  account. 

31 

Merchandise  Inventory    1 1,218.60 

Purchases   

To  reopen  the  Merchandise  Inventory  account  and  to  deduct  the  unsold  goods 
from  the  entire  cost  of  goods  purchased. 

31 

Sales    54,336.02 

Purchases    

To  transfer  the  cost  of  goods  sold  to  the  Sales  account  and  to  close  the  Pur- 
chases account: 

Inventory  12-31-17 $14,874.20 

Net  purchases 48,855.42 

Freight  Inward 1,825.00 

$65,554.62 
Deduct : 
Inventory  12-31-18  11,218.60 

Cost  of  Goods  Sold $54,336.02 

31 

Sales    23,504.18 

Profit  and  Loss 

To  transfer  the  gross  profit  on  sales  to  the  Profit  and  Loss  account  and  to 
close  the  Sales  account. 

31 

Profit  and  Loss 18,047.00 

Delivery  Expense   

Selling  Expense 

Administrative  Expense    

To  transfer  the  accounts  showing  operating  expense  to  Profit  and  Loss  and 
to  close  the  Operating  Expense  account. 

[60] 


31 

Interest  on  Note  Receivable 14.71 

Discount  on  Purchases   1,035.00 

Profit  and  Loss 1,049.71 

To  transfer  the  accounts  with  other  income  to  Profit  and  Loss  account  and 
to  close  the  other  income  accounts. 

31 

Profit  and  Loss 1,454.60 

Interest  on  Notes  Payable 35.60 

Discount  on  Sales   1,249.00 

Loss  on  Bad  Accounts 170.00 

To  transfer  the  accounts  showing  other  charges  to  Profit  and  Loss  account 
and  to  close  the  accounts  with  other  charges. 

31 

Profit  and  Loss 5,052.29 

E.  P.  Mason,  Personal  Account 5,052.29 

To  close  the  Profit  and  Loss  account  and  to  transfer  the  net  profit  for  the 
period  to  E.  P.  Mason  Personal  account. 

Exercise  F   (Model)  Closing  Entries 


161 J 


E.  P.  MASON 
Profit  and  Loss  Statement,  December  31,  1917,  to  December  31,  1918 

Gross  Sales   $78,090.80 

Less: 

Returned  Sales $250.60 

Discounts  on  Sales 1,249.00  1,499.60 

Net  Sales $76,591.20 

Deduct  Cost  of  Goods  Sold: 

Inventory  of  December  31,  1917 $14,874.20 

Purchases    $50,095.42 

Less: 

Returned  Purchases    $1,240.00 

Discounts  on  Purchases 1,035.00 

2,275.00        47,820.42 

Freight  Inward 1,825.00 

$64,519.62 

Less: 

Inventory,  December  31,  1918 11,218.60        53,301.02 


Gross  Profit  on  Sales $23,290.18 

Deduct : 

Operating  Expenses: 

Delivery  Expense $2,825.80 

Selling  Expense    10,196.20 

Administrative  Expense   5,025.00        18,047.00 


Net  Profit  from  Operations 5,243.18 

Add: 

Other  Income: 

Interest  on  Notes  Receivable 14.71 

Total  Income  $5,257.89 

Deduct : 

Other  Charges : 

Interest  on  Notes  Payable $35.60 

Loss  on  Bad  Accounts 170.00  205.60 


$5,052.29 


Exercise  F  (Model) — Profit  and  Loss  Statement  Conforming  to  the  Federal  Tax  Income  Law 


[62] 


STERLING  AND  PRICE 

Balance  Sheet — June  30,  1918 

ASSETS 
Fixed  Assets : 

Real  Estate   *****  ** 

Less  Reserve  for  Depreciation ****  **        *****  ** 

Furniture  and  Fixtures ***  ** 

Less  Reserve  for  Depreciation ***  **  ****  ** 

Auto  Truck   *****  ** 

Less  Reserve  for  Depreciation , ***  **  ****  ** 

Total  Fixed  Assets 

Current  Assets: 

Cash    ****  ** 

Accounts  Receivable *****  ** 

Less  Reserve  for  Bad  Debts **  **        *****  ** 

Notes  Receivable    ***  ** 

Interest  Accrued  on  Notes  Receivable **  ** 

Merchandise  Inventory   *****  ** 

i 
Total  Current  Assets  

Total  Assets  

LIABILITIES  AND  CAPITAL 

Fixed  Liabilities : 

Mortgage  Payable  *****  ** 

Total  Fixed  Liabilities 

Current  Liabilities : 

Accounts  Payable ****  ** 

Salaries  Accrued  **  ** 

Interest  Accrued  on  Mortgage  Payable ***  ** 

Total  Current  Liabilities 

J.  E.  Sterling,  Capital: 

Balance,  December  31,  1917 *****  ** 

Eleven-twentieths  Net  Profit ****  ** 

Balance,  June  30,  1918 

O.  E.  Price,  Capital: 

Balance,  December  31,  1917 *****  ** 

Nine-twentieths  Net  Profit ****  ** 

Balance,  June  30,  1918 


*;£*     ** 


Model  G 
[63] 


FORM  OF  BALANCE  SHEET  TO  BE  USED  WITH  EXERCISE  NO.  121 

EVERT  AND  WILLIAMS 
Balance  Sheet,  June  30,  1918 

ASSETS 

Current  Assets : 

Cash   ****  ** 

Accounts  Receivable ******  ** 

Less  Reserve  for  Bad  Debts ****  **       ******  ** 

Notes  Receivable    ****  ** 

Merchandise  Inventory  (cost) ******  ** 

Total  Current  Assets  

Fixed  Assets : 

Real  Estate    *****  ** 

Less  Reserve  for  Depreciation  of  Buildings ***  **        *****  ** 

Office  Equipment    ****  ** 

Less  Reserve  for  Depreciation ***  **  ****  ** 

Delivery  Equipment ****  ** 

Less  Reserve  for  Depreciation ***  **  ****  ** 

Total  Fixed  Assets 

LIABILITIES  AND  CAPITAL 
Current  Liabilities : 

Accounts  Payable  *******  ** 

Notes  Payable  *****  ** 

Total  Current  Liabilities 

J.  T.  Evert's  Capital : 

Balance,  December  31,  1917 ******  ** 

Add: 

Interest  on  Investment,  Six  Months  at  5%  per  annum ****  ** 

Two-thirds  Net  Profit  for  the  Period ****  **     *******  ** 

Deduct : 

Drawings  in  Excess  of  Salary  during  Six  Months  ending  June 

30,   1918   ****  ** 

Interest  on  Drawings **  **  ****  ** 

Balance,  June  30,  1918 

W.  B.  Williams's  Capital : 
Balance,  December  31,  1917 *****  ** 


******  ** 


*******  ** 


*******  ** 


*******  ** 


[64] 


Add: 

Interest  on  Investment — Six  Months  at  5  Jo  per  annum ****  ** 

One-third  Net  Profit  for  the  Period ****  **       ******  ** 

Deduct : 

Drawings  in  Excess  of  Salary  during  Six  Months  Ending  June  30, 
1918  #  #  **  ** 

Interest  on  Drawings **  **        *****  ** 

Balance,  June  30,  1918 *******  ** 


Total    *******  ** 

Model  H 


[65] 


MODEL!  balance  sheet 

JOHN  B.  THOMAS 
BALANCE  SHEET  DECEMBER  31,  1919. 

Assets 

Current  Assets : 

Cash    

Accounts  Receivable $41,060.90 

Less: 

Reserve  for  Bad  Debts $3,235. 

Reserve  for  Discounts  1,120.  4,355.00 

Notes  Receivable 

Interest  accrued  on  Notes  Receivable 

Merchandise  Inventory  (cost)   

Total  Current  Assets 

Fixed  Assets : 

Real  Estate    44,000.00 

Less  Reserve  for  Depreciation  of  Buildings 3,900.00 

Store   Equipment    3,700.00 

Less  Reserve  for  Depreciation 900.00 

Office  Equipment   1,221.44 

Less  Reserve  for  Depreciation 360.00 

Delivery  Equipment   2,000.00 

Less  Reserve  for  Depreciation 500.00 

Total  Fixed  Assets 

Deferred  Charges  to  Profit  and  Loss : 

Stationery  and  Supplies  on  Hand 

Insurance  Premiums  Unexpired 

Advanced  Advertising  

Taxes  Prepaid  

Total  Deferred  Charges 

Total    

Liabilities  and  Capital 

Current  Liabilities : 

Accounts  Payable 

Notes  Payable 

Interest  Accrued  on  Notes  Payable 

Salaries  Accrued  

Total  Current  liabilities 

[66] 


$3,209.80 


36,705.90 

1,450.00 

48.50 

13,829.70 


40,100.00 


2,800.00 


861.44 


1,500.00 


58.00 

150.50 

1,200.00 

620.50 


$55,243.90 


45,261.44 


2,029.00 
$102,534.34 


13,100.00 

1,000.00 

73.40 

200.00 


14,373.40 


Fixed  Liabilities :  V  »,#".  *.••  '•  '•'  V  '•*'•  •••••'• 

Mortgage  Payable  5,000.00 

Total  Fixed  Liabilities 5,000.00 

Total  Liabilities 19,373.40 

Capital : 

John  B.  Thomas'  Investment  December  31,  1918 71,000.00 

Net  Profit  December  31,  1918  to  December  31,  1919; 12,230.94 

Less  Salary  Overdrawn 70.00         12,160.94        83,160.94 


Total    102,534.34 

Model  I 


[67] 


•'••••  :'m&DEV PROFIT .-AND  LOSS  STATEMENT 

JOHN  B.  THOMAS 

PROFIT  AND  LOSS  STATEMENT  DECEMBER  31,  1918  TO  DECEMBER  31,  1919. 

Gross  Sales $110,218.70 

Less  Returns  1,250.80 

Net  Sales  $108,967.90 

Deduct : 

Cost  of  Sales: 

Inventory  December  31,  1918 $15,189.70 

Gross  Purchases   $70,829.70 

Less  Returns  902.60        69,927.10 

Freight  Inward   1,260.40        86,377.20 

Deduct : 

Inventory  December  31,  1919 13,829.70        72,547.50 

Gross  Profit  on  Sales 36,420.40 

Deduct : 

Operating  Expenses : 

Selling  Expenses  10,725.62 

Delivery  Expenses    2,089.67 

General  Administration  Expenses  8,551.26 

Real  Estate  Expense 1,200.00        22,566.55 

Net  Profit  from  Operations  13,853.85 

Add: 

Other  Income: 

Discount  on  Purchases 1,891.69 

Interest  on  Notes  Receivable  65.00  1,956.69 

Total  Income 15,810.54 

Deduct : 

Other  Charges:  , 

Discount  on  Sales 2,210.00 

Interest  on  Notes  Payable 125.00 

Loss  on  Bad  Accounts 1,243.60  3,578.60 

Net  Profit  December  31,  1918  to  December  31,  1919 12,231.94 

Model  J. 


[68] 


/E   02726 


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